<PAGE>
As filed with the Securities and Exchange Commission on March 12, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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LINKAGE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
----------------------------
Delaware 8742 Application Pending
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
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One Forbes Road
Lexington, Massachusetts 02421
(781) 862-4030
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------------
Philip J. Harkins
President, Chief Executive Officer
and Chairman of the Board
LINKAGE SOLUTIONS, INC.
One Forbes Road
Lexington, Massachusetts 02421
(781) 862-4030
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------
Copies to:
HAL J. LEIBOWITZ, ESQ. KEITH F. HIGGINS, ESQ.
HALE AND DORR LLP ROPES & GRAY
60 State Street One International Place
Boston, Massachusetts 02109 Boston, Massachusetts 02110
Telephone: (617) 526-6000 Telephone: (617) 951-7000
Telecopy: (617) 526-5000 Telecopy: (617) 951-7050
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date hereof.
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,
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,
check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price(1) Registration Fee
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<S> <C> <C>
Common Stock, $.01 par value
per share $39,991,250 $11,118
</TABLE>
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
----------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the Securities and Exchange Commission +
+declares our registration statement effective. This prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated March 12, 1999
Shares
[LINKAGE SOLUTIONS, INC. LOGO APPEARS HERE]
Common Stock
$ per share
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. Linkage Solutions, . This is our initial
Inc. is offering public offering and no
shares and selling public market
stockholders are currently exists for
offering shares. our shares.
. We anticipate that the . Proposed trading
initial public symbol: Nasdaq
offering price will be National Market --
between $ and $ LNKG.
per share.
---------------------
This investment involves risk. See "Risk Factors" beginning on page 8.
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<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price........................................... $ $
Underwriting discount...........................................
Proceeds to Linkage.............................................
Proceeds to selling stockholders................................
</TABLE>
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- --------------------------------------------------------------------------------
The underwriters have a 30 day option to purchase up to additional
shares of common stock from us to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved of anyone's investment in these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
U.S. Bancorp Piper Jaffray BancBoston Robertson Stephens
The date of this prospectus is , 1999
<PAGE>
[A montage composed of three round graphics on a blue field: The top graphic
consists of logos from 16 conferences sponsored by Linkage, accompanied by a
list of the following events and services: "Conferences," "Institutes,"
"Workshops," "Research" and "Customized Programs." The middle graphic shows a
small group of people meeting around a conference table, accompanied by a list
of the following services and programs: "Competency Modeling," "HR Systems,"
"Assessment," "Coaching," "Leadership Development" and "College/University
Partnerships." The bottom graphic shows a variety of Linkage products,
including books, CD-ROMs and audio cassettes, accompanied by a list of the
following items: "Tools & Methodologies," "Publications" and "Assessment
Instruments." The Linkage logo appears in the top left corner; the text
"Linkage: The Worldwide Organizational Development Company" appears in the
bottom right corner; and Linkage's street address and website address appear at
the bottom.]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................................................ 4
Risk Factors....................................................... 8
Use of Proceeds.................................................... 13
S Corporation Distributions and Termination of S Corporation Sta-
tus................................................................ 13
Dividend Policy.................................................... 14
Capitalization..................................................... 15
Dilution........................................................... 16
Selected Financial Data............................................ 17
Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 19
Business........................................................... 27
Management......................................................... 41
Certain Transactions............................................... 48
Principal and Selling Stockholders................................. 49
Description of Capital Stock....................................... 50
Shares Eligible for Future Sale.................................... 52
Underwriting....................................................... 54
Validity of Common Stock .......................................... 56
Experts............................................................ 56
Where You Can Find More Information................................ 56
Index to Consolidated Financial Statements......................... F-1
</TABLE>
------------------------------
You should rely only on the information contained in this prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. This prospectus is not an offer to sell, nor is it
seeking an offer to buy, these securities in any state where the offer or sale
is not permitted. The information in this prospectus is complete and accurate
as of the date on the front cover, but the information may have changed since
that date.
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about Linkage and our
industry. These forward-looking statements involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these forward-
looking statements as a result of the factors that we describe in the "Risk
Factors" section and elsewhere in this prospectus. We undertake no obligation
to update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future.
We were organized in Delaware in March 1999 as a subsidiary of Linkage, Inc., a
Massachusetts corporation ("Linkage Massachusetts"). Before the closing of this
offering, each share of Linkage Massachusetts will be exchanged for 560 shares
of our common stock and each option to purchase a share of Linkage
Massachusetts will be exchanged for an option to purchase 560 shares of our
common stock. In connection with these share and option exchanges, Linkage
Massachusetts will become our subsidiary. We refer to this process as our
"reorganization." Unless the context otherwise requires, references to
"Linkage," "we" or "our" refer to Linkage Solutions, Inc. and its subsidiaries
and, with respect to operations before the date of our reorganization, these
references are to Linkage Massachusetts and its subsidiaries.
We have applied for trademarks for Linkage, The Global Institute For Leadership
Development, Accelerated Competency System and ACS. All other trademarks or
trade names referred to in this prospectus are the property of their respective
owners.
3
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this prospectus. You
should read the entire prospectus, including the financial statements and
related notes, before making an investment decision. Unless otherwise
indicated, all information in this prospectus gives effect to our
reorganization described above and assumes that the underwriters do not
exercise their option to purchase additional shares in this offering.
Our Business
Linkage is a leading provider of organizational development and corporate
education programs, services and products designed to improve the efficiency,
effectiveness and productivity of individual employees and organizations. Our
business has expanded rapidly in recent years and our revenues have increased
from $4.1 million in 1994 to $24.3 million in 1998, representing a compound
annual growth rate of 57%.
The organizational development market is a large and diverse industry
encompassing all aspects of employee, team and leadership development,
including assessment, training, organizational design and other initiatives
focused on performance improvement. The corporate training and education market
is a growing and highly visible component of the organizational development
market. According to TRAINING Magazine, domestic corporations with over 100
employees budgeted approximately $60.7 billion for training programs in 1998, a
4.7% compound annual increase from 1993. Of that total, $14.3 billion was spent
on external providers of training products and services, an 8.8% compound
annual increase from 1993.
In order to meet the needs of this expanding marketplace, we offer our
customers a broad range of relevant programs, services and products. These
offerings include:
. Programs. We develop high-quality programs addressing specific
organizational development topics, such as leadership development, team
development and coaching. We deliver these programs through a variety of
formats, such as open-enrollment public conferences, institutes and
workshops and customized in-house programs. Our programs feature
speakers and participants who are premier business thinkers, strategists
and authors, or "thought leaders," such as Warren Bennis and Robert
Reich, and business leaders such as John Sculley and Howard Schultz. In
1998, more than 9,000 individuals, including employees of 80 of the
Fortune 100 companies, attended our programs.
. Services. Our consulting services assist our customers in evaluating and
implementing individual and organizational performance improvement,
often using tools, techniques and methodologies introduced in our
programs. In 1998, we provided consulting services to clients such as
American Express Company, American Home Products Corporation, Kraft
Foods, Inc., Lucent Technologies, Inc., The Principal Financial Group,
Toyota Motor Manufacturing and Xerox Corporation.
. Products. We offer stand-alone products such as tools and methodologies,
assessment instruments and publications that are typically derived from
or complement our programs and services.
4
<PAGE>
Our programs, services and products are differentiated from those of our
competitors by the experience of our consultants, the thought leaders and
business leaders with whom we work and the extensive market research underlying
our offerings. We believe that we are well-positioned to expand and leverage
these strengths because of the experience and stability of our management, the
core of which has been with us since 1992. The key characteristics of the
Linkage solution are our:
. comprehensive offerings;
. relationships with premier thought leaders and business leaders;
. ability to provide market-driven topics and methodologies;
. ability to deliver customized solutions; and
. practical applications designed to provide measurable business results.
Our objective is to become the leading provider of high-quality organizational
development and corporate education programs, services and products. Our growth
strategy to achieve this objective is to:
. continue to expand our programs, services and products in order to
satisfy the organizational development needs of our customers;
. continue to pursue an aggressive sales and marketing strategy designed
to establish new customer relationships, expand existing relationships
and capitalize upon significant cross-selling opportunities;
. establish and maintain ongoing relationships with thought leaders and
business leaders;
. continue to pursue the acquisition of complementary organizational
development businesses, such as our recent acquisition of High
Technologies, a company that develops and delivers information
technology courseware and training;
. expand our channels of distribution through further creation of
international partnerships and partnerships with selected colleges and
universities; and
. continue to expand our delivery methods in order to leverage the content
of our programs, services and products and better serve the specific
needs, budgetary constraints and cultures of our customers.
Office Location
Our principal executive office is located at One Forbes Road, Lexington,
Massachusetts 02421 and our telephone number is (781) 862-4030. Our Internet
website is located at www.linkageinc.com. Neither the information contained in
our website nor any websites linked to our website is a part of this
prospectus.
5
<PAGE>
The Offering
Common stock offered:
By Linkage.................................. shares
By selling stockholders..................... shares
Total................................... shares
Common stock outstanding after the offering..... shares
Offering price.................................. $ per share
Use of proceeds................................. Repayment of debt, working
capital and other general
corporate purposes, including
possible acquisitions.
Proposed Nasdaq National Market symbol.......... LNKG
The number of shares of our common stock that will be outstanding after this
offering is based on the number outstanding on March 12, 1999. It excludes
133,280 shares subject to outstanding options under our stock plans at a
weighted average exercise price of $7.34 per share and 1,900,000 additional
shares available for issuance under those plans.
Summary Financial Data
The following table sets forth certain summary financial data with respect to
our company. As you review this summary you should note the following:
. For all periods presented, we were an S corporation for income tax
purposes and therefore not subject to federal and most state income
taxes. Our S corporation status will terminate before the closing of
this offering.
. The pro forma net income available to common stockholders shown below
has been computed as if we were a C corporation and subject to federal
and all applicable state income taxes. The pro forma basic and diluted
weighted average shares outstanding include the estimated number of
shares required to pay the S corporation dividend described below under
"S Corporation Distributions and Termination of S Corporation Status."
. The pro forma balance sheet data shown below reflect the declaration and
payment of the S corporation dividend, which is estimated to be
approximately $8.3 million at December 31, 1998 and a tax-related
distribution in March 1999, expected to be $1.0 million.
. The pro forma as adjusted balance sheet data shown below reflect our
sale of shares of common stock in this offering at an assumed
initial public offering price of $ per share, after deducting
underwriting discounts and our estimated offering expenses.
6
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues.................... $ 4,051 $ 6,750 $ 10,733 $ 17,550 $ 24,274
Gross profit................ 1,821 3,347 4,884 7,709 11,105
Income from operations...... 587 753 1,566 1,978 2,817
Net income available to
common stockholders........ 579 771 1,443 1,930 3,565
Basic and diluted net income
per common share........... $ 0.13 $ 0.13 $ 0.23 $ 0.31 $ 0.56
Basic weighted average
shares outstanding......... 4,424,000 5,819,827 6,143,200 6,300,919 6,327,279
Diluted weighted average
shares outstanding......... 4,424,000 5,819,827 6,148,612 6,324,149 6,375,026
Pro Forma Data:
Net income available to common stockholders......................... $ 3,565
Pro forma incremental income tax provision.......................... 997
---------
Pro forma net income available to common stockholders............... $ 2,568
=========
Pro forma basic net income per common share......................... $ 0.37
Pro forma basic weighted average shares outstanding................. 7,035,612
Pro forma diluted net income per common share....................... $ 0.36
Pro forma diluted weighted average shares outstanding............... 7,083,359
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-------------------------
Pro
Forma
Pro As
Actual Forma Adjusted
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit)............................. $ 6,829 $(2,471) $
Accounts receivable................................... 4,889 1,454
Total assets.......................................... 12,045 5,216
Total debt............................................ 250 2,721
Stockholders' equity (deficit)........................ 8,269 (1,031)
</TABLE>
7
<PAGE>
RISK FACTORS
You should consider carefully the risks described below before you decide to
buy our common stock. If any of the following risks actually occur, our
business, financial condition or results of operations would likely suffer. In
such case, the trading price of our common stock could fall, and you may lose
all or part of your investment.
Our rapid growth could strain our operating infrastructure and management
Our rapid growth could significantly strain our operating infrastructure and
management. Our business has grown significantly in size and complexity over
the past several years. Our total revenues increased from $4.1 million in 1994
to $24.3 million in 1998. We expect to continue to grow both internally and
through acquisitions. Our systems, procedures and controls may not be adequate
to support our operations as they expand. Future growth may also impose
significant added responsibilities on members of our management. If we are
unable to manage our growth, the quality of our services, our ability to retain
key personnel and our business, financial condition and results of operations
would be materially adversely affected.
The success of our programs requires us to attract thought leaders and business
leaders
One of our greatest assets is the caliber of premier business thinkers,
strategists and authors, or "thought leaders," and business leaders that
participate in our programs. We believe that the strength of our brand name and
reputation significantly depends on our ability to continue to offer customers
access to thought leaders and business leaders. As our program and service
offerings expand, our need for thought leaders and business leaders will also
increase. However, these leaders generally have limited time to devote to
engagements such as our programs. We generally contract with thought leaders
and business leaders on a program-by-program basis. We may not always be able
to secure the services of these individuals. Our failure to attract or engage
these individuals in sufficient numbers could have a material adverse effect on
our business, financial condition and results of operations.
Our business may be particularly susceptible to the risks of changing economic
conditions
Our existing and future customers may view expenditures for attendance at our
programs and purchases of our services and products as more discretionary than
other budgetary expenditures. As a result, our revenues and profitability may
be affected by general levels of economic activity and employment. We believe
that any significant economic downturn or recession could result in reduced
attendance at our programs and purchases of our services and products and
accordingly could adversely affect our business, financial condition and
results of operations.
Our quarterly operating results may continue to fluctuate
Our quarterly operating results fluctuate and may continue to do so as a result
of a number of factors, including:
. program schedules, attendance, cancellations or postponements;
. the gain or loss of material customer relationships;
. the utilization rates of our salaried consultants;
. the timing or completion of customer engagements; and
. the timing, structure and magnitude of acquisitions.
8
<PAGE>
Because of the potential for fluctuations in quarterly results, we believe that
period-to-period comparisons of our results of operations are not necessarily
meaningful or indicative of future performance. Future revenues and results of
operations may vary substantially. It is also possible that in some future
quarters our results of operations will fall below our expectations or those of
public market analysts and investors. In either case, the price of our common
stock would likely decrease.
Our revenues are seasonal
We have experienced, and may in the future experience, significant seasonality
in our business, which may affect our financial condition or results of
operations. Our revenues have historically been highest in the fourth quarter
of the year and lowest in the first quarter. We attribute this seasonality to
fewer scheduled programs in the winter months due primarily to inclement
weather and our customers' annual budgetary considerations. This seasonality
may cause our gross margins to vary significantly on a quarterly basis. We
believe that this seasonal trend will continue for the foreseeable future.
We depend on our key management
Our success depends largely on the skills, experience and performance of our
executive officers and key employees, including Philip J. Harkins, our
President, Chief Executive Officer and Chairman of the Board; Larry R. Carr,
our Chief Operating Officer and Treasurer; Todd G. Langton, our Vice President
of Educational Programs and Products; and David J. Giber, our Vice President of
Consulting. These individuals have been our core management team since 1992 and
have been responsible for business development, building relationships with
thought leaders and business leaders and overall management of our business. We
do not have employment contracts with any of our executive officers. These
individuals may not remain with us, and the loss of any one of them could have
a material adverse effect on our business, financial condition and results of
operations.
We must attract and retain qualified consultants, program managers and sales
and marketing personnel
In order to initiate and develop customer relationships and execute our growth
strategy, we must attract and retain qualified consultants, program managers
and sales and marketing personnel. Competition for such qualified personnel is
intense and we may be unable to hire qualified personnel in sufficient numbers.
Our failure to attract, assimilate or retain qualified personnel in sufficient
numbers may have an adverse effect on our business, financial condition and
results of operations.
Our success depends on our ability to develop new and enhanced organizational
development programs, services and products
Because the organizational development and corporate education market and the
needs of our customers are constantly changing, we must continuously enhance
our programs, services and products and develop new ones. Our failure to
provide new programs, services and products that address important and emerging
industry needs could materially adversely affect our business, financial
condition and results of operations.
Our operation of college and university programs involves a number of risks
Our future growth depends in part upon establishing and maintaining strategic
partnerships with colleges and universities to provide high-quality educational
and training programs. However, we may be unsuccessful in maintaining and
expanding our existing partnerships or may be unable to establish and maintain
new partnerships with colleges and universities. In 1998, we began directly
operating facilities offering corporate education programs through our college
and university partners. We incur start-up and operating costs associated with
these programs, such as labor, occupancy and equipment expenses, and pay a
royalty to the college or university based on program revenues. Historically,
we developed similar programs with college and university partners which the
partner marketed and
9
<PAGE>
implemented. We have not traditionally borne the start-up or operating costs or
operating responsibilities for these programs. We may be unable to successfully
implement Linkage-operated programs without incurring significant start-up
costs and initial operating losses and, once implemented, these programs may
not be commercially successful or profitable.
We may be unable to make strategic acquisitions or successfully integrate
acquired businesses
We intend to make strategic acquisitions of providers of organizational
development and corporate education programs, services and products. In 1998,
we completed our first acquisition with the purchase of High Technologies, a
company that develops and delivers information technology, or IT, courseware
and training. We may be unable to identify and acquire additional businesses or
integrate and manage any acquired businesses without substantial costs, delays
or other operational or financial problems. The process of integrating acquired
companies may involve unforeseen difficulties and require a disproportionate
amount of management's attention and financial and other resources. Increased
competition for acquisition candidates may develop, in which event we may have
fewer acquisition opportunities and higher acquisition costs. Any business we
acquire in the future may not achieve anticipated revenues and earnings. Our
inability to acquire, integrate and manage successfully providers of
organizational development and corporate education programs, services and
products could have a material adverse effect on our business, financial
condition and results of operations.
We may be unable to protect our intellectual property rights
Although we attempt to protect our intellectual property, our products do not
generally include any mechanisms to prohibit or prevent unauthorized copying or
use by third parties. A third party could copy or otherwise obtain and use our
products, services or methodologies in an unauthorized manner or use these
products, services or methodologies to develop substantially similar
organizational development and training strategies and processes. Unauthorized
use of our products, services or methodologies could have a material adverse
effect on our business, financial condition and results of operations.
We may face intellectual property infringement claims
Third parties may claim that our current or future products, services or
methodologies infringe on their proprietary rights. While we have not been
subject to material intellectual property claims in the past, we expect that
third parties may subject us to such claims as the number of our products,
services and methodologies and the number of our competitors increase in the
future. Any such claim could have a material adverse effect on our business,
financial condition and results of operations.
We may be unable to continue to compete successfully
The organizational development and corporate education market is highly
competitive. Our competitors include several large public and private
companies, and numerous small private training and education providers and
individuals. In addition, most of our customers maintain internal training
departments. Some of our competitors offer programs, services and products that
are similar to ours at lower prices, and some competitors have significantly
greater financial, managerial, technical, marketing and other resources. In
addition, our success depends to a significant extent on our expertise in sales
and marketing, including the use of our proprietary database and our direct
sales and telemarketing efforts. Our competitors may develop and use sales and
marketing techniques similar or superior to ours.
We expect that we will face additional competition from new entrants into our
industry. We may not be able to compete successfully against current and future
competitors. Increased competition may result in price reductions, reduced
gross margins and loss of market share, any of which could materially adversely
affect our business, financial condition and results of operations.
10
<PAGE>
Our international expansion and operations are subject to a number of risks
Revenues from international operations represented approximately 16% of our
revenues during 1998. We intend to expand our international activity as part of
our business strategy. In order to expand international revenues in subsequent
periods, we must establish additional foreign operations, hire additional
personnel and offer additional foreign programs, all of which will require
significant management attention and financial resources. In addition, our
international business may be subject to a variety of risks, including:
. increased costs associated with maintaining and expanding international
marketing efforts;
. difficulties in tailoring our programs to local markets, including
attracting desired speakers from among local business leaders in these
markets;
. difficulties in enforcing contractual obligations and intellectual
property rights; and
. fluctuations in foreign exchange rates.
These risks may have a material adverse effect on our future international
sales and, consequently, on our business, financial condition and results of
operations. As we expand our international operations and sales, we may become
increasingly susceptible to these risks.
Management stockholders will control the outcome of actions requiring
stockholder approval and may prevent or delay a change in control
Our executive officers and directors will beneficially own approximately % of
our outstanding common stock following this offering. These stockholders, if
acting together, would have the ability to elect all of our directors and may
have the ability to determine the outcome of corporate actions requiring
stockholder approval, irrespective of how other stockholders may vote. This
concentration of ownership may have the effect of delaying or preventing a
change in control of Linkage.
Our management has broad discretion over the use of proceeds
With the exception of repaying debt, we have not determined the specific uses
for the net proceeds from this offering. Accordingly, investors in this
offering will rely upon the judgment of our management with respect to the use
of proceeds, with only limited information concerning management's specific
intentions.
You will face a number of market risks typically associated with initial public
offerings
Before this offering, there was no public market for our common stock. We
cannot assure you that an active trading market will develop or be sustained
after this offering. In addition, because the initial public offering price
will be determined by negotiations among us, the selling stockholders and the
underwriters, it may not reflect, and may be higher than, the price at which
shares may trade following the offering. You should be aware that market prices
for securities of companies similar to ours are highly volatile. Factors such
as our earnings releases or those of our competitors, announcements of our new
contracts or service offerings or those of our competitors and market
conditions for stocks of companies similar to ours could have a significant
impact on the market price of our common stock.
We do not anticipate paying cash dividends
We do not anticipate paying cash dividends on our common stock as a public
company. We are restricted from paying cash dividends under the terms of our
bank line of credit.
11
<PAGE>
You will experience an immediate and substantial dilution in the book value of
your investment
The initial public offering price per share of our common stock is expected to
be substantially higher than the pro forma net tangible book value per share of
our outstanding common stock. Accordingly, if you purchase shares of our common
stock in this offering you will suffer an immediate and substantial dilution in
the pro forma net tangible book value per share of common stock from the price
you pay for our common stock.
Future sales by existing stockholders could depress the market price of our
common stock
Sales of substantial numbers of shares of our common stock in the public market
following this offering could adversely affect the market price of our common
stock. After this offering, we will have shares of common stock
outstanding. Holders of 6,292,720 shares of common stock have entered into
lock-up agreements with the underwriters. Under these agreements, these
stockholders may not sell shares of our common stock until 180 days after the
date of this prospectus without the prior permission of U.S. Bancorp Piper
Jaffray Inc., as a representative of the underwriters. All of the shares sold
in this offering will be freely tradable in the public market, and:
. 17,360 additional shares may be sold immediately after the date of this
prospectus;
. 24,080 additional shares may be sold in the public market 90 days after
the date of this prospectus; and
. 6,292,720 additional shares may be sold in the public market upon
expiration of the lock-up agreements, subject to the provisions of Rule
144 under the Securities Act.
We are unable to predict the effect that sales made under Rule 144, or
otherwise, may have on the then prevailing market price of our common stock.
Sales pursuant to Rule 144 or other exemptions from registration may have an
adverse effect on the market price of our common stock and could impair our
ability to raise capital through offerings of our equity securities.
Certain provisions of Delaware law and our charter and by-laws may make a
takeover of our company more difficult
Our certificate of incorporation and by-laws and certain provisions of the
Delaware corporate law may deter hostile takeovers or delay or prevent
acquisition proposals or changes in control or management, including
transactions that might benefit our public stockholders. These provisions could
limit the price that certain investors might be willing to pay in the future
for shares of our common stock.
12
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from our sale of shares of common stock,
after deducting underwriting discounts and our estimated offering expenses,
will be approximately $ ($ if the underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $ per
share. We will not receive any of the proceeds from the sale of shares by the
selling stockholders.
The principal purposes of this offering are to:
. enhance our ability to use our common stock as a means of attracting and
retaining key employees;
. provide increased visibility and credibility in the marketplace;
. enhance our ability to use our common stock as consideration for future
acquisitions;
. facilitate our future access to public equity markets; and
. provide liquidity to our existing stockholders.
We expect to use approximately $2.0 million of the net proceeds of this
offering to repay the outstanding balance on our line of credit, which we will
use to fund a portion of the dividend to our stockholders described below.
Borrowings under our line of credit bear interest at the bank's base rate plus
0.25% (8.0% at March 12, 1999). This line of credit will expire on May 31,
2000. Before borrowing to pay a portion of this dividend, we did not have any
debt outstanding under the line of credit.
We will use the remainder of the net proceeds received from this offering for
working capital and other general corporate purposes, including possible
acquisitions of businesses, products and technologies. From time to time we
engage in discussions with potential acquisition candidates. However, we have
no current plans, commitments or agreements with respect to any acquisitions,
and we may not make any acquisitions.
Except as described above, we have not identified specific uses for the net
proceeds of this offering, and we will have discretion over their use and
investment. Pending use of the net proceeds, we intend to invest these proceeds
in short-term, investment-grade, interest-bearing instruments.
S CORPORATION DISTRIBUTIONS AND TERMINATION OF S CORPORATION STATUS
Since 1988, we have been an S corporation under Subchapter S of the Internal
Revenue Code and applicable state tax laws. As a result, our stockholders,
rather than Linkage, have been required to pay federal and most state income
taxes based on our taxable earnings, whether or not these amounts have been
distributed to them. We have made periodic distributions to our stockholders in
amounts equal to the stockholders' estimated aggregate tax liabilities
associated with our taxable earnings, as well as other dividend distributions.
We made distributions to our stockholders of approximately $60,000 in 1996,
$244,000 in 1997 and $989,000 in 1998. We expect to make a tax-related
distribution of approximately $1.0 million in March 1999.
Before we complete this offering, we will terminate our S corporation status
and will change our method of accounting for tax purposes from the cash method
to the accrual method. At that time, we will also declare a dividend in an
amount equal to our estimate of the undistributed S corporation earnings
through that day (the "S corporation dividend"). We expect that the S
corporation dividend will be approximately $8.5 million, although the actual
amount will depend on our 1999 S corporation earnings.
13
<PAGE>
The S corporation dividend will be paid using a combination of available cash,
certain of our accounts receivable and borrowings under our line of credit. We
will repay any amounts borrowed using a portion of the net proceeds of this
offering. Investors purchasing common stock in this offering will not be
entitled to receive any portion of the S corporation dividend.
We intend to structure the S corporation dividend so that no deferred tax
liability will be recorded in connection with the termination of our S
corporation status. When we terminate our S corporation status, we will become
subject to federal and state income taxes at applicable corporate tax rates.
In connection with the termination of our S corporation status, we will enter
into a tax indemnification agreement with each of the stockholders receiving a
portion of the S corporation dividend relating to their income tax liabilities.
For more information regarding this agreement, see "Certain Transactions."
DIVIDEND POLICY
We currently intend to retain future earnings, if any, to finance our growth
strategy. We do not anticipate paying cash dividends on our common stock as a
public company. We are restricted from paying cash dividends under the terms of
our bank line of credit. Payment of future dividends, if any, will be at the
discretion of our Board of Directors after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs, restrictions in financing agreements and plans for expansion.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998:
. on an actual basis;
. on a pro forma basis to give effect to the S corporation dividend as
if it had been paid on that date (which would have been approximately
$8.3 million), the termination of our S corporation status and a
planned tax-related distribution (expected to be $1.0 million); and
. on a pro forma basis as adjusted to reflect our issuance and sale of
shares of common stock in this offering at an assumed initial
public offering price of $ per share and the application of the
estimated net proceeds, after deducting the underwriting discounts
and our estimated offering expenses.
You should read this table together with our consolidated financial statements
and the notes to those statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
December 31, 1998
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Short-term debt................................. $ -- $ 1,471 $
======= ======= ========
Long-term debt.................................. $ 250 $ 250 $
Stockholders' equity (deficit):
Preferred stock, $.01 par value; 2,000,000
shares authorized, no shares issued or
outstanding.................................. -- -- --
Common stock, $.01 par value; 30,000,000
shares authorized; 6,334,160 shares issued
and outstanding (actual and pro forma);
shares issued and outstanding (pro forma
as adjusted)................................. 63 63
Additional paid-in-capital (deficiency)......... 1,056 (1,063)
Retained earnings............................... 7,181 --
Accumulated other comprehensive loss............ (31) (31)
------- ------- --------
Total stockholders' equity (deficit).......... 8,269 (1,031)
------- ------- --------
Total capitalization (deficiency)............. $ 8,519 $ (781) $
======= ======= ========
</TABLE>
The number of shares outstanding is based on the number of shares of our common
stock outstanding on December 31, 1998. It excludes 66,080 shares subject to
options outstanding under our stock plans at a weighted average exercise price
of $3.61 per share and 1,900,000 additional shares available for issuance under
those plans.
15
<PAGE>
DILUTION
Our pro forma net tangible book value (deficit) at December 31, 1998, after
giving effect to payment of the S corporation dividend and planned March 1999
tax-related distribution, was approximately $(1,664,000), or $(26) per share of
common stock. Pro forma net tangible book value per share represents the amount
of our total tangible assets (total assets less intangible assets) reduced by
our total liabilities, divided by the number of shares of common stock
outstanding. After giving effect to our sale of the shares of common stock
in this offering at an assumed initial public offering price of $ per share
(after deducting the underwriting discounts and our estimated offering expenses
and applying the estimated net proceeds therefrom), our pro forma net tangible
book value as of December 31, 1998 would have been approximately $ , or $
per share. This represents an immediate increase in pro forma net tangible book
value of $ per share to existing stockholders and an immediate dilution in
pro forma net tangible book value of $ per share to new investors purchasing
shares in this offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $
Net tangible book value per share as of December 31, 1998..... $1.21
Net decrease per share attributable to S corporation and tax-
related dividends............................................ (1.46)
-----
Pro forma net tangible book value (deficit) per share before
this offering................................................ (0.26)
Increase per share attributable to this offering..............
---------
Pro forma net tangible book value per share after this
offering......................................................
---------
Dilution per share to new investors............................ $
=========
</TABLE>
The following table summarizes, on a pro forma basis as of December 31, 1998,
the total number of shares of common stock purchased from Linkage, the total
consideration paid and the average consideration paid per share by our existing
stockholders and by the new investors (at an assumed initial public offering
price of $ per share for shares purchased in this offering, before deducting
underwriting discounts and our estimated offering expenses). Shares held by
existing stockholders will be reduced by the number of shares sold by them in
this offering. As a result, the number of shares held by existing stockholders
will be reduced to , or % of the total number of shares of our
common stock outstanding after this offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
----------------- --------------------- Price Per
Number Percent Amount Percent Share
--------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 6,334,160 % $ 9,561 % $ *
New investors............
--------- ----- ---------- ---------
Total.................... 100.0% $ 100.0%
========= ===== ========== =========
</TABLE>
- -------------------------------
* Not meaningful.
The table above assumes no exercise of outstanding stock options and excludes
66,080 shares of common stock subject to options outstanding under our stock
plans and 1,900,000 additional shares of common stock available for issuance
under those plans.
16
<PAGE>
SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below as of December 31,
1997 and 1998 and for the years ended December 31, 1996, 1997 and 1998 are
derived from our consolidated financial statements, which have been audited by
Deloitte & Touche LLP, independent auditors. The selected consolidated
financial data as of December 31, 1994, 1995 and 1996 and for the years ended
December 31, 1994 and 1995 are derived from our unaudited consolidated
financial statements. In the opinion of management, the unaudited consolidated
financial statements have been prepared on a basis consistent with the audited
consolidated financial statements which appear elsewhere in this prospectus and
include all adjustments, which are only normal recurring adjustments, necessary
for a fair statement of the financial position and results of operations for
the unaudited periods. You should read the data set forth below together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the notes to those
statements appearing elsewhere in this prospectus.
For all periods presented, we were an S corporation for income tax purposes and
therefore not subject to federal and most state income taxes. Our S corporation
status will terminate before this offering. The pro forma net income available
to common stockholders has been computed by adjusting net income, as reported,
to record the incremental income tax expense that would have been recorded had
we been a C corporation. The pro forma basic and diluted weighted average
shares outstanding include the estimated number of shares required to pay the S
corporation dividend.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- ---------- ---------- ---------- ---------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ 4,051 $ 6,750 $ 10,733 $ 17,550 $ 24,274
Cost of revenues........ 2,230 3,403 5,849 9,841 13,169
--------- ---------- ---------- ---------- ---------
Gross profit............ 1,821 3,347 4,884 7,709 11,105
Operating expense:
Sales and marketing.... 1,234 832 1,861 3,145 4,152
General and
administrative........ -- 1,189 1,453 2,208 3,036
Stock-based
compensation(/1/)..... -- 573 4 378 79
Settlement
bonuses(/2/).......... -- -- -- -- 1,021
--------- ---------- ---------- ---------- ---------
Total operating
expense.............. 1,234 2,594 3,318 5,731 8,288
--------- ---------- ---------- ---------- ---------
Income from operations.. 587 753 1,566 1,978 2,817
Interest income
(expense), net......... (8) 18 70 124 187
Other income(/2/)....... -- -- -- -- 7,361
--------- ---------- ---------- ---------- ---------
Income before income
taxes.................. 579 771 1,636 2,102 10,365
Income tax provision.... -- -- 193 172 460
--------- ---------- ---------- ---------- ---------
Net income.............. 579 771 1,443 1,930 9,905
Preferential
distribution(/2/)...... -- -- -- -- 6,340
--------- ---------- ---------- ---------- ---------
Net income available to
common
stockholders........... $ 579 $ 771 $ 1,443 $ 1,930 $ 3,565
========= ========== ========== ========== =========
Basic and diluted net
income per common
share.................. $ 0.13 $ 0.13 $ 0.23 $ 0.31 $ 0.56
========= ========== ========== ========== =========
Basic weighted average
shares outstanding..... 4,424,000 5,819,827 6,143,200 6,300,919 6,327,279
Diluted weighted average
shares outstanding..... 4,424,000 5,819,827 6,148,663 6,324,149 6,375,026
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-----------------
(in thousands,
except share and
per share data)
<S> <C>
Pro Forma Data:
Net income available to common stockholders................... $ 3,565
Pro forma incremental income tax provision.................... 997
----------
Pro forma net income available to common stockholders......... $ 2,568
==========
Pro forma basic net income per common share................... $ 0.37
Pro forma basic weighted average shares outstanding........... 7,035,612
Pro forma diluted net income per common share................. $ 0.36
Pro forma diluted weighted average shares outstanding......... 7,083,359
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital............................. $ 667 $1,998 $3,290 $5,112 $ 6,829
Total assets................................ 1,184 2,754 4,864 7,322 12,045
Total debt.................................. 100 -- -- -- 250
Stockholders' equity........................ 783 2,754 3,536 5,579 8,269
</TABLE>
- -------------------------------
(/1/)Stock-based compensation is a non-cash expense related to certain employee
stock option grants and stock grants, and is based on the difference between
the fair market value of our common stock and the option exercise price or
cash paid for stock at the date of grant.
(/2/)In July 1994, we were awarded damages in a breach of contract suit. In
February 1995, while the damages award was being appealed, we transferred the
rights to the damages award to an entity owned by our then sole stockholder.
In 1998, that entity received the damages award and paid amounts totalling
$1.0 million to some of our employees. We recorded these payments to employees
as an expense. We recorded the damages award, net of legal and other related
expenses, as other income in the year ended December 31, 1998. Because the
damages award belongs to the related entity, we accounted for the damages
award, net of related expenses and the employee payments, as a preferential
distribution. For more information, you should see note 6 of the notes to our
consolidated financial statements appearing elsewhere in this prospectus.
18
<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 along with our consolidated financial statements and the notes
to those statements appearing elsewhere in this prospectus.
Overview
We are a leading provider of organizational development and corporate education
programs, services and products designed to improve the efficiency,
effectiveness and productivity of individual employees and organizations. Our
high-quality programs address specific organizational development topics, such
as leadership development, team development and coaching, through different
formats designed to offer our customers varying degrees of scope and
concentration to meet their specific needs. We also offer consulting services
to assist our customers in evaluating and implementing individual and
organizational performance improvement. To complement our programs and
services, we offer stand-alone products such as organizational development
tools and methodologies, assessment instruments and publications.
We were founded and began offering technical training programs in 1988. We
began offering organizational development consulting services in 1991,
organizational development programs in 1992 and organizational development
products in 1993.
We generate our revenues from:
. Registration and sponsorship fees from our public and in-house
programs. We charge our public program attendees rates generally ranging
from $500 to $6,000, depending on the program content, format and
length. These fees are generally pre-paid and non-refundable. We charge
the featured sponsors involved in these programs a fee ranging from
$2,500 to $50,000, depending on the level of sponsorship. We recognize
revenues from each public and in-house program as we complete the
program. Cost of revenues for our public and in-house programs consists
primarily of:
-- the direct costs related to offering these programs, including
salaries and benefits for program managers and operations and
customer service employees;
-- fees to speakers; and
-- costs related to conducting the programs, including food, beverage
and printing costs.
. Fees and royalties on college and university programs. Since 1992, we
have developed programs in conjunction with college and university
partners which the partner markets and implements. For these partner-
operated programs, we receive a market assessment fee, a program
implementation fee and royalties from the college or university partner
based on a percentage of the revenues generated from these programs. For
partner-operated programs, we recognize fee revenues as services are
rendered and royalty revenues when the program is started. Cost of
revenues for these programs consists primarily of labor-related
expenses.
In 1998, we began directly operating facilities offering corporate
education programs through our college and university partners, for
which we charge program attendees a fixed rate generally ranging from
$6,000 to $7,000 per program. We recognize revenues from these Linkage-
operated programs over the term of the program. Cost of revenues for
these
19
<PAGE>
programs includes start-up and operating costs, such as labor,
occupancy, software and equipment lease expenses, and royalties paid to
the college or university partner based on program revenues.
. Fees for consulting services. We generally charge on a time-and-
materials basis for our consulting services. We recognize revenues from
our consulting services based on actual time expended, which is billed
at our hourly rates. Cost of revenues for our consulting services
consists primarily of salaries and benefits for our consultants.
. Direct sales of books, program materials and other products. Our books,
program materials and other products are typically sold on a unit basis
or through licensing arrangements. We recognize fee and royalty revenues
on direct sales of our books, program materials and other products when
sold. Cost of revenues for our books, program materials and other
products consists primarily of the costs of purchasing, printing and
distributing these materials.
The primary factors affecting our gross margins are the number of attendees and
sponsors for our public and in-house programs and the utilization rates of our
consultants. Other factors that affect our gross margins include the number of
programs with our college and university partners and the volume of sales of
our books and other products.
Our operating expense generally consists of sales and marketing expense, and
general and administrative expense. Our sales and marketing expense relates
primarily to our programs and, as such, fluctuates in relation to the number of
programs that we offer. This expense consists primarily of:
. printing and postage costs associated with our direct marketing efforts;
. salaries, benefits and bonuses for our sales, marketing and related
administrative personnel; and
. marketing and administrative expenses for our public and in-house
programs.
Our general and administrative expense consists primarily of costs associated
with management and administrative personnel, occupancy costs, depreciation and
amortization of goodwill.
As part of our business strategy, we intend to expand our international
operations. We derived approximately 15.9% of our revenues in 1998 from
international operations. This activity primarily involved:
. offering six conferences in Europe and Canada on selected organizational
development topics;
. providing consulting services to various Canadian companies, European
companies and European subsidiaries of multi-national organizations; and
. selling books and other products by direct mail catalogs distributed in
Canada and Europe.
In August 1998, we completed our first acquisition with the purchase of High
Technologies for $500,000 in cash and an acquisition liability of $250,000. We
may also be required to pay up to an additional $215,000 in cash based on the
future earnings of High Technologies. We accounted for this transaction as a
purchase and recorded $645,000 of goodwill, which we are amortizing over a 40-
year period.
20
<PAGE>
In July 1994, in connection with a breach of contract claim, a jury returned a
verdict in our favor and awarded us damages. In February 1995, while this suit
was being appealed, we transferred this award to a related company owned by our
then sole stockholder. In 1998, the related company received a settlement for
this claim of $7.4 million, net of legal fees and other related expenses, which
we accounted for as other income in our statement of operations. Some of our
employees were awarded bonuses in recognition of their efforts related to the
suit. We accounted for these payments as settlement bonuses. The remaining
amounts were accounted for as a preferential distribution to a stockholder.
These transactions had no net effect on our 1998 net income available to common
stockholders.
We have granted some of our employees shares of our common stock in recognition
of their efforts and importance to us. We have recorded an expense immediately
on the date of the grant, based on the fair market value of the stock on the
date of grant. We have also granted some of our employees options to purchase
our common stock. In these cases, we have recorded or are recording an expense
for the difference between the option exercise price and the fair market value
of the stock on the date of grant. These expenses appear in our statement of
operations as stock-based compensation, which we recognized as $378,000 in 1997
and $79,000 in 1998. We will continue to record stock-based compensation until
the last of these stock options fully vest.
For all the periods presented, we have been treated for federal and state
income tax purposes as an S corporation. As a result, our stockholders, rather
than Linkage, were taxed directly on our earnings. Before we complete this
offering, we will declare the S corporation dividend. We will then terminate
our S corporation status and will be subject to federal and state income taxes
at applicable corporate tax rates. See "S Corporation Distributions and
Termination of S Corporation Status."
Results of Operations
The following table expresses the items in our statement of operations as a
percentage of revenues for the periods indicated and as a percentage change
from the prior period:
<TABLE>
<CAPTION>
As a Percentage of Percentage Increase (Decrease)
Revenues From the Prior Period
-------------------------- ----------------------------------
1995 1996 1997 1998 1996 1997 1998
----- ----- ----- ----- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 59.0% 63.5% 38.3%
Cost of revenues........ 50.4 54.5 56.1 54.3 71.9 68.2 33.8
----- ----- ----- ----- ---------- ---------- ----------
Gross margin............ 49.6 45.5 43.9 45.7 45.9 57.9 44.1
Operating expense:
Sales and marketing.... 12.3 17.3 17.9 17.1 123.7 69.0 32.0
General and
administrative........ 17.6 13.5 12.6 12.5 22.2 52.0 37.5
Stock-based
compensation.......... 8.5 0.0 2.2 0.3 * * *
Settlement bonuses..... -- -- -- 4.2 -- -- *
----- ----- ----- ----- ---------- ---------- ----------
Total operating
expense.............. 38.4 30.8 32.7 34.1 27.9 72.8 44.6
----- ----- ----- ----- ---------- ---------- ----------
Income from operations.. 11.2 14.7 11.3 11.6 108.0 26.3 42.4
Interest income, net.... 0.3 0.6 0.7 0.8 288.9 77.7 51.0
Other income............ -- -- -- 30.3 -- -- *
----- ----- ----- ----- ---------- ---------- ----------
Income before income
taxes.................. 11.5 15.3 12.0 42.7 112.2 28.5 393.3
Income tax provision.... -- 1.8 1.0 1.9 -- (10.9) 167.4
----- ----- ----- ----- ---------- ---------- ----------
Net income.............. 11.5 13.5 11.0 40.8 87.2 33.8 413.3
Preferential
distribution........... -- -- -- 26.1 -- -- *
----- ----- ----- ----- ---------- ---------- ----------
Net income available to
common stockholders.... 11.5% 13.5% 11.0% 14.7% 87.2% 33.8% 84.8%
===== ===== ===== ===== ========== ========== ==========
</TABLE>
- ------------------------------
* Not meaningful.
21
<PAGE>
1998 compared with 1997
Revenues. Revenues for 1998 increased by $6.7 million, or 38.3%, to $24.3
million from $17.5 million for 1997. The increase in revenues was primarily due
to:
. an increase in the number of conferences offered to 19 in 1998 from 14
in 1997;
. an increase in the utilization rate and number of our consulting
personnel; and
. an increase in the number of institutes offered to three in 1998 from
one in 1997.
Cost of revenues and gross margin. Cost of revenues for 1998 increased by $3.4
million, or 33.8%, to $13.2 million from $9.8 million for 1997. This increase
was primarily due to increases in the cost of labor, speaker fees and food,
beverage and other costs resulting from increases in the number of conferences
held and the number of individuals employed in 1998. Gross margin for 1998
increased to 45.7% from 43.9% for 1997 because our direct costs were spread
over a greater number of programs.
Sales and marketing expense. Sales and marketing expense for 1998 increased by
$1.0 million, or 32.0%, to $4.2 million from $3.1 million for 1997. This
increase was primarily due to an increase in our outbound telemarketing payroll
to support the increased number of programs offered in 1998. As a percentage of
revenues, sales and marketing expense decreased to 17.1% for 1998 from 17.9%
for 1997. This decrease was primarily due to an increase in the number of
institutes, which have a higher per participant fee relative to the direct
marketing costs to promote these programs. We expect sales and marketing
expense to increase in absolute dollars as we expand our sales and marketing
efforts but to remain relatively constant as a percentage of revenues.
General and administrative expense. General and administrative expense for 1998
increased by $828,000, or 37.5%, to $3.0 million from $2.2 million for 1997.
This increase was primarily due to an increase in our management, finance and
information services personnel and increased rent expense due to the opening of
our San Francisco and Dallas regional offices, and the expansion of our
Minneapolis regional office and our Lexington, Massachusetts headquarters. As a
percentage of revenues, general and administrative expense decreased to 12.5%
for 1998 from 12.6% for 1997. We expect general and administrative expense to
increase in absolute dollars and as a percentage of revenues as we continue to
invest in the infrastructure necessary to support future growth.
Settlement bonuses. Settlement bonuses totalled $1.0 million in 1998. See
footnote (2) of "Selected Financial Data." There were no similar settlement
bonuses in any of our previous years, and we do not anticipate similar
settlement bonuses in future years.
1997 compared with 1996
Revenues. Revenues for 1997 increased by $6.8 million, or 63.5%, to $17.5
million from $10.7 million for 1996. The increase in revenues was primarily due
to:
. an increase in the number of conferences offered to 14 in 1997 from 10
in 1996;
. the offering of our first institute in 1997; and
. an increase in the number of our consulting personnel.
Cost of revenues and gross margin. Cost of revenues for 1997 increased by $4.0
million, or 68.2%, to $9.8 million from $5.8 million for 1996. This increase
was primarily due to increases in the costs of labor, speaker fees and food,
beverage and other costs resulting from increases in the number of
22
<PAGE>
conferences held and the number of individuals employed in 1997. Gross margin
for 1997 decreased to 43.9% from 45.5% for 1996. This decrease was primarily
due to intended increases in speaker fees and food and beverage costs.
Sales and marketing expense. Sales and marketing expense for 1997 increased by
$1.3 million, or 69.0%, to $3.1 million from $1.9 million for 1996. As a
percentage of revenues, sales and marketing expense increased to 17.9% for 1997
from 17.3% for 1996. The increase in sales and marketing expense in absolute
dollars and as a percentage of revenues was primarily due to an increase in
printing and direct mail costs for our brochures.
General and administrative expense. General and administrative expense for
1997 increased by $756,000, or 52.0%, to $2.2 million from $1.5 million for
1996. This increase was primarily due to an increase in administrative
personnel to accommodate our growth as well as increased rent and relocation
expenses related to our move to expanded facilities in Lexington,
Massachusetts. As a percentage of revenues, general and administrative expense
decreased to 12.6% for 1997 from 13.5% for 1996.
1996 compared with 1995
Revenues. Revenues for 1996 increased by $4.0 million, or 59.0%, to $10.7
million from $6.8 million for 1995. The increase in revenues was primarily due
to an increase in the number of conferences offered to 10 in 1996 from four in
1995 and an increase in consulting revenues.
Cost of revenues and gross margin. Cost of revenues for 1996 increased by $2.4
million, or 71.9%, to $5.8 million from $3.4 million for 1995. This increase
was primarily due to an increase in labor, food and beverage costs and speaker
fees. Gross margin for 1996 decreased to 45.5% from 49.6% for 1995. This
decrease was primarily due to increases in speaker fees and food and beverage
costs.
Sales and marketing expense. Sales and marketing expense for 1996 increased by
$1.0 million, or 123.7%, to $1.9 million from $832,000 for 1995. As a
percentage of revenues, sales and marketing expense increased to 17.3% for 1996
from 12.3% for 1995. The increase in sales and marketing expense in absolute
dollars and as a percentage of revenues was primarily due to an increase in
printing and mailing costs and an increase in the number of telemarketing
personnel.
General and administrative expense. General and administrative expense for 1996
increased by $264,000, or 22.2%, to $1.5 million from $1.2 million for 1995.
This increase was primarily due to an increase in the number of administrative
personnel. As a percentage of revenues, general and administrative expense
decreased to 13.5% for 1996 from 17.6% for 1995.
23
<PAGE>
Selected Quarterly Results of Operations
The following table sets forth the items in our statement of operations for
each of the four calendar quarters in 1998 in dollars and as a percentage of
revenues. This unaudited information was prepared on a basis consistent with
our audited consolidated financial statements which appear elsewhere in this
prospectus and include all adjustments, which are only normal recurring
adjustments, necessary for a fair statement of the results of operations for
the unaudited periods.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1998 1998 1998 1998
--------- --------- --------- -------- --------- -------- --------- --------
(in thousands) (as a percentage of revenues)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $ 3,158 $ 5,657 $ 6,328 $ 9,131 100.0% 100.0% 100.0% 100.0%
Cost of revenues............. 1,887 2,584 3,550 5,148 59.8 45.7 56.1 56.4
--------- --------- -------- -------- --------- ------- ------- -------
Gross profit................. 1,271 3,073 2,778 3,983 40.2 54.3 43.9 43.6
Operating expense:
Sales and marketing......... 437 934 1,190 1,590 13.8 16.5 18.8 17.4
General and administrative.. 648 708 863 817 20.5 12.5 13.6 9.0
Stock-based compensation.... 61 -- 18 -- 1.9 -- 0.3 --
Settlement bonuses.......... 990 -- -- 32 31.4 -- -- 0.3
--------- --------- -------- -------- --------- ------- ------- -------
Total operating expense..... 2,136 1,642 2,071 2,439 67.6 29.0 32.7 26.7
--------- --------- -------- -------- --------- ------- ------- -------
Income
(loss) from operations...... (865) 1,431 707 1,544 (27.4) 25.3 11.2 16.9
Interest income, net......... 41 54 52 40 1.3 1.0 0.8 0.4
Other income................. 7,361 -- -- -- 233.1 -- -- --
--------- --------- -------- -------- --------- ------- ------- -------
Income before income taxes... 6,538 1,485 758 1,584 207.0 26.3 12.0 17.3
Income tax provision......... 52 26 138 244 1.6 0.5 2.2 2.7
--------- --------- -------- -------- --------- ------- ------- -------
Net income................... 6,486 1,459 620 1,340 205.4 25.8 9.8 14.7
Preferential distribution.... 6,340 -- -- -- 200.8 -- -- --
--------- --------- -------- -------- --------- ------- ------- -------
Net income available to
common stockholders......... $ 146 $ 1,459 $ 620 $ 1,340 4.6% 25.8% 9.8% 14.7%
========= ========= ======== ======== ========= ======= ======= =======
</TABLE>
Our revenues have historically been highest in the fourth quarter and lowest in
the first quarter of each year. The increase in the fourth quarter primarily
reflects the seasonality of our programs business. We typically schedule more
programs in the fall months to accommodate the travel and attendance
preferences of our customers and schedule fewer programs in the winter months
in consideration of inclement weather and our customers' annual budget
considerations.
We believe that these seasonal trends will continue for the foreseeable future.
Because of the potential for fluctuation in results, we believe that period-to-
period comparisons of our results of operations are not necessarily meaningful
or indicative of future performance. It is also possible that in some future
quarters our results of operations will fall below our expectations or those of
public market analysts and investors. In either case, the price of our common
stock would likely decrease.
In 1998, our gross margins were 40.2% for the first quarter, 54.3% for the
second quarter, 43.9% for the third quarter and 43.6% for the fourth quarter,
as compared to 45.7% for the entire year. The lower gross margin in the first
quarter was primarily due to the seasonality of our programs business. The
higher gross margin in the second quarter was primarily due to better than
expected attendance at two of our conferences in that quarter.
Liquidity and Capital Resources
As of December 31, 1998, we had cash and cash equivalents of approximately $3.4
million and working capital of $6.8 million.
24
<PAGE>
Historically, we have funded our growth from cash generated from operations.
Our operating activities provided cash of approximately $1.5 million in 1998,
$1.8 million in 1997 and $2.9 million in 1996. The decrease in cash from
operations in each year was primarily due to increases in prepaid expenses and
accounts receivable.
Net cash used in investing activities consisted of capital expenditures of
approximately $1.3 million in 1998, $319,000 in 1997 and $188,000 in 1996 for
purchases of computer equipment and software and, in 1998, for the acquisition
of High Technologies. The increases in each year reflect our overall expansion
and growth.
The net cash that we used in our financing activities consisted of
approximately $908,000 in 1998 primarily as a result of S corporation
distributions offset in part by an increase in long-term debt, and $240,000 in
1997 and $60,000 in 1996 as a result of S corporation distributions.
We have a line of credit with BankBoston, N.A. for up to $4.0 million that is
secured by substantially all of our assets. Borrowings bear interest at the
bank's base rate plus 0.25% per year. To date, we have not used this line of
credit. We anticipate borrowing under this line of credit to fund a portion of
the S corporation dividend and intend to repay such borrowings through proceeds
from this offering.
We have no material commitments for any capital expenditures. We believe that
anticipated funds from operations, proceeds from this offering and amounts
available under our line of credit will satisfy our anticipated working capital
and capital expenditure requirements for the foreseeable future.
Euro
Effective January 1, 1999, the European Monetary Union created a single
currency, the euro, for its member countries. A transition period, from January
1, 1999 through December 31, 2001, will allow the member countries to convert
systematically their local currencies to the euro. During this transition
period, either the euro or a member country's currency will be accepted as
legal tender.
We have systems in place in Linkage International Ltd., our wholly-owned U.K.
subsidiary, that have the capability to convert foreign currencies, including
the euro. We have considered the effect on pricing and technology when
evaluating the impact of the euro and determined that its adoption will not
likely have a significant impact on our financial condition or results of
operation.
Quantitative and Qualitative Disclosures about Market Risk
In the normal course of business, our financial position and results of
operations are routinely subjected to a variety of risks, including market risk
associated with interest rate movements on borrowings and currency rate
movements on non U.S. dollar denominated assets and liabilities.
We utilize cash from operations and U.S. dollar denominated borrowings to fund
our working capital and investment needs. Short-term debt, if required, is used
to meet working capital requirements.
We have a line of credit available as a source of financing for our working
capital requirements. Borrowings under this credit agreement bear interest at
the bank's base rate plus 0.25%. At December 31, 1998 and 1997, we had no
short-term or long-term debt outstanding.
Our foreign currency exposure is generated primarily from our European
operating subsidiary. Based upon sensitivity analysis as of December 31, 1998,
a 10% favorable change in foreign currency exchange rates would cause the fair
value of our financial instruments to increase by $130,000. A 10% unfavorable
change would cause the fair value of our financial instruments to decrease by
$130,000.
25
<PAGE>
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," effective for fiscal years beginning after June 15,
1999. This standard requires that all companies record derivatives on the
balance sheet as assets or liabilities, measured at fair market value. Gains or
losses resulting from changes in the values of derivatives would be accounted
for depending on the use of the derivative and whether it qualifies for hedge
accounting. We will adopt this statement during fiscal 2000 and we are
currently assessing the impact the statement will have on our financial
statements.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, or SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for
internal use. This pronouncement identifies the characteristics of internal use
software and provides guidance on new cost recognition principles. SOP 98-1 is
effective for financial statements for fiscal years beginning after December
15, 1998. We currently expense our costs of computer software developed or
obtained for internal use and expect the adoption of SOP 98-1 will not have a
material impact on our financial statements.
The Year 2000 Issue
We use information technology systems in our internal operations, including
"off-the-shelf" applications used for financial management, sales management,
customer registration, order processing and various administrative functions.
We also internally use personal computers and various voice and data
communications systems. We employ the Internet to market certain of our
programs, products and services, and use computer hardware and software in the
delivery of the IT training that we offer through our college and university
partnerships. Some of the vendors who provide services to us also use
information technology systems and software products.
We have completed an internal assessment of year 2000 compliance of the
information technology systems and software products that we use. We believe
that these systems and products are year 2000 compliant.
If our IT systems or software products experience year 2000 failures or
malfunctions, our operations may be substantially curtailed until we, or our
third-party suppliers, develop a solution to address each system's or product's
failure. In such event, we may be unable to access customer records, operate
our Internet site, receive email or prepare our financial statements for the
fourth quarter of 1999 or periods thereafter. We have resolved all internal
year 2000 issues identified to date and therefore do not currently have year
2000 related contingency plans.
Because we have relationships with, and to varying degrees depend upon, a
number of third parties that provide us with information, goods and services,
we are also subject to risks associated with such third parties' year 2000
issues. These third parties include financial institutions, customers, vendors
and suppliers. If these or other third parties experience year 2000 failures or
malfunctions there could be an adverse impact on our ability to conduct
operations. We have not yet completed our evaluation of our vendors'
contingency planning with respect to their potential year 2000 deficiencies. We
intend to complete these evaluations by September 1999.
We have also completed an assessment of the year 2000 risks associated with our
programs, services and products and we have determined that they present no
material year 2000 issues.
Our costs to date on year 2000 compliance have not been material. We currently
believe that any future costs to remediate any year 2000 issues will not have a
material adverse effect on our business, financial position or results of
operations.
26
<PAGE>
BUSINESS
We are a leading provider of organizational development and corporate education
programs, services and products designed to improve the efficiency,
effectiveness and productivity of individual employees and organizations. Our
offerings include:
. Programs. We develop high-quality programs addressing specific
organizational development topics, such as leadership development, team
development and coaching. We deliver these programs through a variety of
formats, such as open-enrollment public conferences, institutes and
workshops and customized in-house programs, designed to offer our
customers varying degrees of scope and concentration to meet their
specific needs. Our programs feature speakers and participants who are
premier business thinkers, strategists and authors, or "thought
leaders," such as Warren Bennis and Robert Reich, and other business
leaders such as John Sculley and Howard Schultz. In 1998, more than
9,000 individuals, including employees of 80 of the Fortune 100
companies, attended our programs.
. Services. Our consulting services assist our customers in evaluating and
implementing individual and organizational performance improvement,
often using tools, techniques and methodologies introduced in our
programs. In 1998, we provided consulting services to clients such as
American Express Company, American Home Products Corporation, Kraft
Foods, Inc., Lucent Technologies, Inc., The Principal Financial Group,
Toyota Motor Manufacturing and Xerox Corporation.
. Products. We offer stand-alone products such as tools and methodologies,
assessment instruments and publications that are typically derived from
or complement our programs and services.
Our revenues have increased from $4.1 million in 1994 to $24.3 million in 1998,
representing a compound annual growth rate of 57%.
Industry Background
The organizational development market is a large and diverse industry
encompassing all aspects of employee, team and leadership development,
including assessment, training, organizational design and other initiatives
focused on performance improvement. We believe that organizations are
increasingly seeking to improve the structures, systems and strategies that
enhance human performance. As a result, organizations increasingly view
training, development and education expenditures as necessary investments in
human capital rather than discretionary expenses.
The corporate training and education market is a growing and highly visible
component of the organizational development market. According to TRAINING
Magazine, domestic corporations with over 100 employees budgeted approximately
$60.7 billion for training programs in 1998, a 4.7% compound annual increase
from 1993. Of that total, $14.3 billion was spent on external providers of
performance improvement services, an 8.8% compound annual increase from 1993.
We believe that the growth in the organizational development and corporate
education market has been and will continue to be driven by a number of key
factors, including the following:
. The workplace is becoming increasingly knowledge-intensive. As a result,
more organizations recognize that the skills, knowledge and effective
interaction of an organization's workforce can be significant
competitive advantages.
27
<PAGE>
. As the rate of change in work processes and systems accelerates, a
growing number of organizations must formalize their organizational
learning and performance improvement activities in order to remain
competitive.
. Due to a documented shortage of skilled workers, organizations are
increasingly finding it necessary to implement broad organizational
development initiatives and provide employee education programs
addressing specific skills.
These trends place greater demands on the limited resources of human resource
and training departments. In addition, as the need to design and implement
organizational development initiatives becomes more important, corporations
seek greater access to leading management and organizational development
strategies through interaction with thought leaders and business leaders.
However, few organizations have access to these leaders or the resources or
expertise to design and implement the strategies necessary to maximize the
development of employees and the organization. Corporations increasingly
recognize that this experience and knowledge is often available only through
external providers. We believe, therefore, that organizations seek a single
provider who can:
. address a broad range of organizational development and corporate
education needs;
. expose the organization to leading management strategies, thought
leaders and business leaders;
. assist in designing, developing and implementing organizational
development structures, strategies and systems; and
. provide tools, methodologies and other resources that assist the
organization in measuring the performance outcomes of their training
initiatives.
The Linkage Solution
We design, develop and implement programs, services and products to meet the
broad organizational development needs of our customers across all industries.
. Programs. We offer high-quality programs addressing specific
organizational development topics, such as leadership development, team
development and coaching, through different formats designed to offer
our customers varying degrees of scope and concentration to meet their
specific needs. Our programs include:
--open enrollment public programs, including conferences, institutes and
workshops;
--research-based programs;
--customized in-house programs; and
--corporate education programs through our partnerships with colleges
and universities.
. Services. We offer consulting services to assist our customers in
evaluating and implementing individual and organizational performance
improvement, often through techniques and methodologies introduced in
our programs.
. Products. We offer stand-alone products such as tools and methodologies,
assessment instruments and publications that are typically derived from
or complement our programs and services.
28
<PAGE>
Our programs, services and products are differentiated by the experience of our
consultants, the thought leaders and business leaders with whom we work and the
extensive market research underlying our offerings. We believe that we are
well-positioned to expand and leverage these strengths because of the
experience and stability of our management, the core of which has been with us
since 1992. The key characteristics of the Linkage solution are:
. Comprehensive Offerings. We offer our customers a broad range of
organizational development programs, services and products, ranging from
multi-day public conferences and on-site consulting to publications and
assessment instruments. These offerings enable our customers to assess
and address their organizational needs, gain exposure to current
organizational development strategies and develop and implement major
initiatives to address these needs. We believe that our ability to
provide a broad range of offerings enables us to meet the complete
organizational development requirements of our customers.
. Premier Thought Leaders and Business Leaders. Our conferences and other
programs are distinguished by the participation of premier industry
thought leaders and business leaders. Typically, our programs feature
five to 15 of these leaders. Presentations at our programs in 1998
featured thought leaders such as Warren Bennis, Robert Reich, John
Kotter, David Ulrich, Gary Hamel, Peter Drucker and Rosabeth Moss
Kanter, and business leaders such as John Sculley, Bob Galvin and Rich
Teerlink. These speakers are among the most well known and respected
professionals in their areas of expertise. They enhance the quality and
reputation of our programs, thereby enhancing the Linkage brand name,
and provide our customers with access to current strategies, trends and
practical applications in the organizational development field.
. Market-Driven Topics and Methodologies. We are committed to presenting
our customers with programs, services and products that respond to the
evolving demands of the organizational development and corporate
education market. To ensure that our current and proposed offerings
respond to customer needs, we:
-- perform independent and ongoing market research;
-- conduct focused telemarketing inquiries;
-- use our corporate-sponsored research programs to identify and
evaluate new program, service and product offerings;
-- conduct market surveys for possible new program topics; and
-- review exit evaluations from each of our programs.
. Ability to Deliver Customized Solutions. We offer customized consulting
services and in-house programs tailored to address customers' needs
within their specific structural and cultural environments. Through our
consulting services, we assist our customers in assessing their
organizational development needs and designing, developing and
implementing solutions intended to meet their specific objectives. In
addition to offering a wide range of public programs, we tailor programs
to a customer's defined organizational development needs through our
customized in-house programs.
. Practical Applications Designed to Provide Measurable Business
Results. We offer programs, services and products designed to provide
measurable results through practical business
29
<PAGE>
applications. For our consulting engagements, we typically perform a
needs assessment and assist our customers in outlining tangible goals
with specific deliverables. We educate our customers in how to define
and implement these goals and deliverables through specific programs,
tools and methodologies, including competency-based curricula, employee
selection methodologies, pay and reward systems and performance and
evaluation systems. In addition, we develop methodologies that allow our
customers to measure the results of these programs.
Growth Strategy
Our objective is to become the leading provider of high-quality organizational
development and corporate education programs, services and products. Our growth
strategy to achieve this objective is to:
. Expand Program, Service and Product Offerings. We intend to continue to
expand our program, service and product offerings to satisfy the
expanding organizational development needs of our customers. We
continually monitor emerging trends and ideas in organizational
development and are committed to integrating the most current
methodologies into our offerings. We plan to increase the frequency of
our established programs, introduce new programs, services and products
and expand our geographical presence to support regional, national and
international customer relationships. For example, during 1999 we plan
to introduce approximately 12 new conferences, including several on new
organizational development topics.
. Expand Sales and Marketing Capabilities. We intend to continue to pursue
an aggressive sales and marketing strategy designed to establish new
customer relationships and expand existing relationships. We have
increased our dedicated sales and marketing staff from 15 at the end of
1996 to 33 at the end of 1998. We expect to continue to add sales and
marketing personnel to drive future growth. We also intend to:
-- continue to expand our proprietary database of approximately 75,000
human resource professionals, senior executives and managers;
-- strengthen our direct marketing and outbound telemarketing efforts;
-- increase the number and effectiveness of our direct marketing
campaigns, which in 1998 involved mailing approximately 3.8 million
brochures;
-- increase the number of college and university partnerships and
leverage these relationships to serve as distribution and marketing
channels; and
-- continue to strengthen the Linkage brand name by increasing overall
awareness of our programs, services and products, developing
additional high-quality programs and attracting additional thought
leaders and business leaders.
. Capitalize on Cross-Selling Opportunities. We believe that our broad
offering of programs, services and products and large existing customer
base provide us with significant cross-selling opportunities. For
example, conferences and research-based programs can introduce attendees
to our consultants who are featured in the programs. We believe that
this exposure positions us and our consultants as valuable resources in
a specific topic area, often creating opportunities to sell our
consulting services and other related programs and products. Our public
programs also provide us with a forum to promote and sell other
programs, services and products relating to different topics through our
available literature and sales representatives. In addition, product
purchases often generate interest in related programs and in our
consulting services.
30
<PAGE>
. Establish and Maintain Relationships With Thought Leaders and Business
Leaders. The participation of organizational development thought leaders
and business leaders is a critical element of our reputation and the
attraction of our programs, services and products. As a result, we
believe that it is important to establish and maintain ongoing
relationships with these leaders. In addition to raising the profile of
our conferences and other programs, these leaders provide us with
insight into current and emerging trends and ideas which we can
incorporate into our programs, services and products. We also believe
that affiliations with additional thought leaders and business leaders
will further enhance our reputation, expand our areas of expertise and
assist us in attracting new customers.
. Pursue Strategic Acquisitions. Because the organizational development
and corporate education market is highly fragmented, we believe that
there are numerous opportunities to acquire complementary businesses. We
completed our first acquisition with the purchase of High Technologies
in 1998. We intend to continue to pursue strategic acquisitions to
expand our program, service and product offerings, gain expertise in new
areas of organizational development, gain access to additional thought
leaders and establish or enhance customer relationships.
. Expand Channels of Distribution. We intend to further develop
complementary opportunities through the expansion of channels of
distribution. For example, we plan to continue to broaden our offerings
outside the United States through the expansion of our programs and the
strengthening and further creation of international partnerships. We
also intend to continue to develop relationships with colleges and
universities to provide corporate education programs in partnership with
them.
. Expand Delivery Methods. We currently offer multiple delivery methods
for our programs, products and services, including public seminars,
classroom instruction, satellite instruction, train-the-trainer
programs, books, audiotapes and videotapes. In order to further leverage
the content of our programs, services and products and better serve the
specific needs, budgetary constraints and cultures of our clients, we
intend to continue to expand our delivery methods. In particular, we
plan to make further investments in technology-based delivery systems,
including the Internet, intranets, CD-ROMs and other formats.
Programs, Services and Products
We provide a broad range of organizational development and corporate education
programs, services and products designed to improve the efficiency,
effectiveness and productivity of individual employees and organizations. We
design, develop and deliver a variety of public and in-house conferences,
institutes, workshops and other programs concerning various organizational
development topics and offer a range of organizational development consulting
services, tools and methodologies and assessment instruments. Through our
programs, services and products, we seek to develop long-term relationships
with our customers' human resource development professionals to better assess
and address customers' specific needs.
31
<PAGE>
The diagram below illustrates how we take organizational development solutions
and turn them into specific programs, services and products for our customers.
The diagram further demonstrates the cross-selling opportunities that exist
among our offerings.
[A diagram in the form of a circle, with the term "Organization Development
Solutions" in the center and the terms "Programs", "Products" and "Services" at
points along the circumference. Arrows points outwards from the term in the
center to each of the terms along the circumference, and arrows point along
the circumference in both directions between each paid of terms.]
Programs
We offer conferences, institutes and workshops on an open enrollment basis.
These are public events held in various cities throughout the year in
conference centers or hotels in the United States and abroad. Our public
programs are typically attended by human resource development professionals
and senior executives and managers from Fortune 1000 organizations, mid-sized
organizations and governmental entities. We also offer customized in-house
programs tailored to a customer's specific needs, limited enrollment research-
based programs and programs through our college and university partners. In
1998, programs accounted for approximately 68% of our revenues.
Conferences. Each of our conferences is devoted to a specific organizational
development topic or issue. Conferences are typically two-day events that
feature five to ten thought leaders or business leaders as keynote speakers.
Conferences also include smaller break-out sessions devoted to related topical
areas or best practice case studies from leading corporations. In connection
with conferences, we typically offer optional full-day pre-conference and
post-conference workshops on specific issues related to the conference's
overall topic. Most of our conferences feature exhibits sponsored by leading
providers of products and services relating to the conference topic.
32
<PAGE>
Our conferences typically attract between 200 and 900 attendees per conference.
In 1998, our conferences attracted an aggregate of nearly 6,000 paid attendees.
Registration fees for our conferences average approximately $1,100 per attendee
in the United States and approximately $2,000 per attendee abroad, with extra
registration fees paid for pre-conference and post-conference workshops.
Scheduled conferences for 1999 include the following:
<TABLE>
<CAPTION>
Conference Dates Offered* Location
---------------------------------- --------------- -----------------
<S> <C> <C>
ERP Implementation/Recruitment and Retention February 15-17 San Francisco, CA
Conference
HR Structure & Strategy Conference March 1-4 San Diego, CA
Corporate Education Forum March 4-5 San Diego, CA
Succession Management Conference March 22-25 New Orleans, LA
Coaching & Mentoring Conference April 12-15 Boston, MA
Knowledge Management & Organizational April 19-22 London, England
Learning Conference
Change 99 Conference May 2-5 Atlanta, GA
Leadership Summit on Corporate Entrepreneurship May 10-12 Boston, MA
Assessment, Measurement & Evaluation Conference May 10-13 Arlington, VA
Assessment, Measurement & Evaluation Conference May 10-13 London, England
Best of Teams Conference June 7-10 Chicago, IL
Leadership Development Conference June 13-16 San Francisco, CA
Change 99 Conference June 21-24 Brussels, Belgium
Competency Tools & Applications Conference June 21-24 Toronto, Canada
Consulting Skills & Tools Conference September 13-16 Boston, MA
Best of 360(degrees) Assessment Conference September 27-29 Dallas, TX
Coaching & Mentoring Conference September 27-30 London, England
Competency Tools & Applications Conference October 11-14 Chicago, IL
Chief Learning Officer Conference October 25-27 Boston, MA
International Competency Conference October 25-28 London, England
International Executive Development Conference November 15-18 London, England
Workforce Conference November 15-18 Orlando, FL
</TABLE>
- -------------------------------
* Includes pre- and post-conference workshops. Actual dates are subject to
change.
A majority of the conferences scheduled for 1999 were offered in prior years.
We also intend to introduce approximately 12 new conferences in 1999.
Institutes. In 1997, we began offering institutes, which are four-to-six day
programs for senior executives and managers with targeted attendance ranging
from 100 to 500 individuals. We believe that institutes offer senior executives
and managers an opportunity to refine their management and leadership
capabilities while also sharing personal experiences and best practices with
their peers. Like conferences, institutes involve well-known keynote speakers
and the generation and exchange of ideas resulting from the interaction of
participants. Institutes also focus on individual or team development during
skill-building sessions and within selected learning teams. In addition, our
institutes typically include pre-program individual or team assessment and
post-program follow-up. We offer some of our institutes under our Global
Institute for Leadership Development brand name.
33
<PAGE>
In 1998, our three institutes attracted approximately 675 paid attendees.
Registration fees for our institutes typically range from $2,000 to $6,000 per
participant. The following four institutes are currently scheduled for 1999:
<TABLE>
<CAPTION>
Institute Dates Offered* Location
--------------------------------- -------------- ---------------
<S> <C> <C>
Global Human Resource Institute** November 1-5 Boston, MA
Global Human Resource Institute November 1-5 London, England
Emerging Leader Program** November 14-19 San Diego, CA
Consulting Institute December 6-9 Orlando, FL
</TABLE>
- -------------------------------
* Actual dates are subject to change.
** Denotes institutes that we also offered in 1998.
Workshops. We offer a number of workshops providing in-depth studies of
particular organizational development topics, such as competency development,
leadership development, team development and human resource consulting skills.
Most of our workshops are offered between four and ten times per year and are
conducted over a two-day period. Each workshop is led by a Linkage consultant
using our proprietary methods, tools and processes and is designed to build
specific skills around an identified topic through an interactive format with
practical exercises.
Attendance for our workshops typically ranges from five to 25 individuals. In
1998, our 59 workshops attracted approximately 650 paid attendees. Registration
fees for our workshops typically range from $500 to $1,000 per participant.
The following are our scheduled workshops for 1999, each of which we will offer
a number of times throughout the year at locations in the United States:
Workshops
- --------------------------------------------------------------------------------
Building Competency-Based Selection, The Tools of an Accelerated
Performance, and Learning Systems* Competency
System (ACS)*
Implementing Competency-Based
360(degrees) Assessments* Introduction to Assessment,
Measurement and Evaluation (AME)*
Foundations of an Accelerated
Competency System (ACS)* Designing and Implementing
Leadership Development Programs*
Introduction to Competency-Based
Systems* Advanced Consulting Skills*
Interviewing Skills* Fundamentals of Project Management
Consultant as Change Agent* Coaching Skills for Managers*
Consulting Skills for HR Building High Performance Teams*
Professionals*
Introduction to Organizational
Systems Thinking Development (OD)*
Developing a Coaching and Mentoring
System*
- -------------------------------
* Denotes workshops that we also offered in 1998.
Research-Based Programs. In 1998, we began offering research-based programs
called "action research studies." Each action research study concerns a
specific organizational development topic, such as the development of high-
potential employees or performance management. Action research studies are
generally conducted over a three-month time span and typically involve the
participation of one or
34
<PAGE>
more thought leaders to help frame and interpret the research, as well as one
or more sponsors with subject matter expertise. Action research studies focus
on generating and sharing benchmarking data, which also provide the basis for
research reports that we intend to sell as stand-alone products. We conducted
one action research study in 1998 and have scheduled six studies for 1999.
Action research studies typically attract between 10 and 20 organizations per
study. Registration fees are approximately $15,000 per organization.
Customized In-House Programs. In addition to our various public programs, we
offer customized in-house programs, which are conducted on-site at the
customer's premises and are led by our consultants. Each of our in-house
training programs typically focuses on a discrete organizational development
topic such as leadership development, competency development, consulting skills
or coaching. In-house programs closely resemble our public workshops, except
that they are tailored to a customer's defined organizational development
needs. To permit this customization, we often conduct a needs analysis or
assessment project before the in-house program. In 1998, we conducted
approximately 30 in-house programs for our customers. The length of each
program is usually two days, with fees typically ranging from $7,000 to
$15,000.
College and University Partnerships. We partner with colleges and universities
throughout the United States to design, implement and promote corporate
education programs to meet business and individual needs for knowledge and
skill building. Each of our partnerships is structured in one of two ways:
partner-operated college and university partnerships, in which we provide the
program content and the partner markets and delivers the program, or Linkage-
operated college and university partnerships, where we develop, market and
deliver the program in conjunction with our partner. In both cases, our
agreements generally have a term of three years.
In both partner-operated and Linkage-operated college and university programs,
we typically perform a market assessment for a potential college or university
partner to assess the demand for specific corporate education topics in that
market. Most of our programs have historically involved IT training courses on
subjects such as client/server technology and UNIX/C++. Participants that
successfully complete a program receive a certificate from our college or
university partner. We believe that our college and university partnerships
provide us with a potential distribution channel for our current and future
programs and products.
Since 1988, we have partnered with 20 colleges and universities in the
development and implementation of corporate education programs, including four
new partnerships in 1998. College and university partners from which we
generated revenues since January 1, 1997 include the following:
<TABLE>
<S> <C>
Baylor University Southern Methodist University
DePaul University University of Minnesota
The George Washington University University of Southern California
The Pennsylvania State University Worcester Polytechnic Institute
</TABLE>
We acquired High Technologies, a company that develops and delivers IT
courseware and training, in 1998. We intend to make use of this capability and
the High Technologies methodologies to design and develop new programs and
products that will be distributed through our network of colleges and
university partnerships and through other channels.
For our services, each of our partners in the partner-operated college and
university partnerships pays us a market assessment fee, a program
implementation fee and a percentage of the revenues generated by the program.
In Linkage-operated college and university partnerships, we receive a market
assessment fee, incur start-up and operating costs associated with these
programs, including occupancy
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<PAGE>
and equipment expenses, and pay our college or university partner a royalty
based on program revenue. See "Risk Factors--Our operation of college and
university programs involves a number of risks."
Services
We offer a broad range of consulting services relating to many of the
organizational development topics and issues on which we offer programs. Our
consulting engagements generally include a needs assessment, the design and
development of an organizational development strategy and the implementation of
that strategy. Our consulting engagements vary from smaller-scale projects,
such as a two-day needs assessment with fees of less than $10,000, to larger-
scale projects, such as the design, development and implementation of a
leadership development system and program with fees exceeding $500,000. We
typically bill for our consulting services on a time-and-materials basis. Most
of our consulting engagements involve a combination of competency modeling,
organizational development and human resource systems, assessment, coaching and
leadership development. We performed consulting services for over 100 customers
in 1998, generating approximately 27% of our revenues.
Competency Modeling. A competency model is a profile of the skills, knowledge,
abilities and behaviors underlying superior job and organizational performance
for a particular job function or organization. Our competency models are an
important part of our consulting services. We typically identify the
competencies for a particular job function or organization through interviews
with senior management and employees with superior performance. Alternatively,
we identify competencies by using the proprietary tools and methodologies of
our Accelerated Competency System. Our customers use our competency models to
refine their recruitment, selection, training and development and performance
management systems.
Organizational Development and Human Resource Systems. Our consultants assist
customers in the design, development and implementation of organizational
development and human resource systems. Specific services include the
following:
. selection systems for hiring and promotion;
. performance management systems to help focus and monitor individual
performance;
. succession planning systems to assist in the identification and
development of the future leadership of the organization;
. training and development systems that involve training needs assessment,
competency-based curriculum development and evaluation mechanisms to
measure the impact of training on the desired business outcomes; and
. learning systems that represent innovative alternatives to traditional
training and development systems.
Assessment. We offer assessment services for individuals or teams designed to
foster and direct self-development efforts. We typically either design a
customized assessment instrument that reflects the skills, knowledge and
competencies that are critical to an organization or a particular job, or
employ one of our standard assessment instruments. We may use an assessment
instrument to capture data from only the person being assessed (self-
assessment) or from that person and his or her manager, peers and direct
reports (360 degree assessment). We process such data and prepare a report that
summarizes
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<PAGE>
and interprets the data. These reports also frequently contain a written
interpretive analysis that identifies strengths and development needs, as well
as accompanying developmental guides.
Coaching. We provide senior executives with personalized coaching, as well as
counseling on strategic issues, performance improvement and the interpretation
of personalized assessment data. We also offer team development services
through which our consultants work with a customer's senior leadership team on
a long-term basis, facilitating regular meetings, helping to clarify the team's
internal rules and ultimate objectives and providing ongoing support in
reaching those objectives.
Leadership Development. We provide leadership development services,
representing a combination of our assessment, coaching and other consulting
services, targeted specifically at the needs of an organization's senior
executives. For example, a leadership development engagement with a particular
customer can involve the following:
. the building of a leadership competency model;
. the design and administration of a standard or customized assessment
instrument to measure leadership capabilities; and
. executive coaching.
Products
We are increasingly focused on developing tools and methodologies, publications
and assessment instruments to market and sell on a stand-alone basis and as
support for our program and service offerings. We believe that there are
significant opportunities to leverage our expertise in organizational
development by creating stand-alone products which either complement our other
offerings, introduce new organizational development ideas or generate interest
in our programs and services. We believe that our products serve as effective
marketing tools for prospective consulting customers and increase our exposure
and credibility in the industry. In 1998, product sales accounted for
approximately 5% of our revenues.
Tools and Methodologies. We have converted several of our tools and
methodologies into stand-alone products. For example, in 1996 Linkage and
McLagan International jointly developed the Accelerated Competency System, or
ACS, which includes an Individual's ACS Toolkit for Self-Management, a
Manager's ACS Toolkit and a generic menu of outputs, competencies and work
conditions. We license and sell our ACS products to customers and use them in
conjunction with certain consulting services. In addition, we have developed
and are currently testing ACS-related software, which is scheduled to be
released during 1999.
Publications. We market, sell and distribute publications covering a wide range
of organizational development topics written by leading authors, professors and
theorists. We sell books at our conferences, as well as through direct mail
catalogs and our Internet website. Some of the publications that we offer are
written by our personnel, including Outsourcing and Human Resources, a book co-
authored in 1996 by Philip J. Harkins; the Competency Model Handbook, a
compilation of over 30 competency models; and other materials that emerge from
our programs. We also plan to offer Mr. Harkins' new book, Powerful
Conversations: How High Impact Leaders Communicate, scheduled to be released in
1999.
Assessment Instruments. We have developed and market several assessment
instruments designed to provide insight into certain characteristics of an
individual or team. For example, we developed The
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<PAGE>
Leadership Assessment Instrument, which tests for certain critical leadership
competencies and skills and can be utilized for 360 degree assessments or self-
assessments. We use this and several of our other assessment instruments in
conjunction with our programs and services. We have also developed stand-alone
versions of other standard assessment instruments.
Customers
Our customers include Fortune 1000 companies, medium-sized corporations,
government entities, colleges and universities and non-profit organizations. We
have developed a broad base of customers, with no customer accounting for more
than 3% of our revenue during 1998. The following is a representative list of
our consulting services customers since January 1, 1998:
<TABLE>
<S> <C>
American Express Company Lucent Technologies, Inc.
American Home Products Corporation National Education Association
Baystate Health System Northwest Airlines, Inc.
Case Corporation The Principal Financial Group
Eli Lilly and Company Ralston Purina Company
EMC Corporation Scudder Kemper Investments, Inc.
General Electric Capital Corporation Toyota Motor Manufacturing
Keane, Inc. United Nations
Kraft Foods, Inc. Xerox Corporation
Lifespan, Inc.
</TABLE>
In 1998, more than 9,000 individuals, including employees of 80 of the Fortune
100 companies, attended our programs.
Marketing and Sales
We market our programs, services and products primarily to human resource and
organizational development professionals, senior executives and managers. We
maintain a proprietary database containing information on approximately 75,000
of these individuals. In addition, we believe that our broad offering of
programs, services and products and large existing customer base provide us
with significant cross-selling opportunities. For example, our public programs
can introduce attendees to featured Linkage consultants. In addition, our
stand-alone products are often marketed and sold to our existing program and
service customers. Although each member of our 33-person sales and marketing
staff specializes in sales of specific programs, services and products, we
provide incentives to our staff to leverage cross-selling opportunities when
they present themselves.
We market and sell our programs, services and products through a variety of
channels, including the following:
. Direct Mail. We produce brochures and other promotional pieces for our
programs, services and products and distribute these materials by direct
mail to individuals contained in our database. We also occasionally rent
and utilize other marketing lists for direct mail purposes. In 1998, we
mailed approximately 3.8 million brochures to past, current and
prospective customers.
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<PAGE>
. Telemarketing. As of December 31, 1998, we employed 25 professionals to
market our programs, services and products by telephone, primarily by
contacting individuals contained in our database. Our telemarketing
staff is organized to focus on conferences, sponsors and exhibitors,
institutes, workshops, in-house programs, consulting and corporate-
sponsored research programs.
. Direct Sales. We rely on in-person sales efforts, particularly for our
consulting services. Generally, senior consultants with expertise in a
potential customer's practice area conduct these business development
efforts. We also believe that our educational programs and the
occasional special forums that we conduct to share research and generate
leads provide valuable marketing and sales opportunities.
. The Internet. In 1997, we established an Internet website to market our
programs, services and products. Our website contains a description of
our services, enables users to request information on, register for and
pay for our programs and allows users to purchase products.
. Publications and Presentations. We regularly produce and distribute
newsletters on organizational development topics in order to generate
interest in our programs, services and products. In addition, our senior
personnel occasionally publish articles and books on organizational
development topics and are frequent keynote speakers or presenters at
our programs, as well as at similar events sponsored by other
organizations.
Most of our marketing and sales activity is generated from our headquarters in
Lexington, Massachusetts. We also have regional offices in Minneapolis, San
Francisco and Dallas to promote our programs, services and products on a
regional basis. In Europe, we have a strategic relationship with a U.K.-based
firm that provides us with marketing, sales and operations support.
Competition
The organizational development and corporate education industry is competitive,
and we expect the level of competition to increase. We believe that the
principal competitive factors in the industry are:
. the quality, scope and price of programs, services and products;
. the strength of customer relationships;
. access to thought leaders and business leaders;
. reputation;
. the ability to adapt to evolving and changing customers needs;
. the ability to customize programs, services and products to meet those
needs; and
. the ability to offer a broad range of delivery methods, including
technology-based methods.
Although we believe that we compete favorably in our industry, some of our
competitors have significantly greater financial, managerial, technical,
marketing and other resources. Our competitors include:
. larger public and private companies and organizations engaged in the
business of providing organizational development programs, services and
products;
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<PAGE>
. large professional service companies that generally offer organizational
development programs, services and products as an adjunct to their other
professional services; and
. numerous smaller, privately held companies, most of which provide a
limited range of programs, services and products or serve a limited
geographic region.
In addition, many of our customers and potential customers have internal
training departments that provide similar services.
Intellectual Property
We rely upon a combination of trade secret, copyright and trademark laws and
non-disclosure and other contractual arrangements to protect our proprietary
rights. We generally enter into confidentiality agreements with our consulting
customers and independent contractors. We also limit access to and distribution
of our proprietary information. However, the steps we take to protect our
intellectual property may not be adequate to deter misappropriation of our
proprietary information. In addition, we may be unable to detect unauthorized
use of and take appropriate steps to enforce our intellectual property rights.
Although we believe that our services and products do not infringe on the
intellectual property rights of others, we are subject to the risk that such a
claim may be asserted against us in the future.
Employees
As of December 31, 1998, we had a total staff of 127 full-time employees. Our
professional personnel have a variety of educational backgrounds, including
advanced degrees in training and education, industrial/organizational
psychology and clinical psychology. None of our employees is subject to a
collective bargaining agreement. We believe that our relations with our
employees are excellent.
Facilities
Our headquarters are located in approximately 24,500 square feet of office
space in Lexington, Massachusetts occupied under a lease expiring on December
31, 2002. We also lease office space under short-term leases in Minneapolis,
San Francisco and Dallas.
Legal Proceedings
From time to time, we are involved in routine litigation that arises in the
ordinary course of our business. There are no material pending legal
proceedings to which we are a party or to which our property is subject.
40
<PAGE>
MANAGEMENT
Directors and Executive Officers
Our executive officers and directors, and their respective ages and positions
as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Philip J. Harkins............... 51 President, Chief Executive Officer and
Chairman of the Board of Directors
Larry R. Carr................... 51 Chief Operating Officer, Treasurer and
Director
Todd G. Langton................. 35 Vice President of Educational Programs and
Products
David J. Giber.................. 44 Vice President of Consulting
John E. Doerr................... 48 Vice President of College and University
Partnerships
James E. Harkins, Jr............ 56 Vice President
Peter McKenzie.................. 49 Chief Financial Officer
Warren Bennis(/1/)(/2/)......... 73 Director
Wallace A. Cataldo.............. 48 Director Nominee
</TABLE>
- -------------------------------
(/1/)Member of the Compensation Committee.
(/2/)Member of the Audit Committee.
Philip J. Harkins is the founder of Linkage and has served as our President,
Chief Executive Officer and Chairman of our Board of Directors since July 1988.
From 1980 to 1988, Mr. Harkins served as Vice President and as a member of the
Executive Committee of Keane, Inc., a national IT services company. From 1973
to 1980, he held various senior management positions in both domestic and
international locations for Raytheon Company, a global electronics company. Mr.
Harkins has also held various senior administrative and faculty positions at
Boston University. He is Co-Chair of our Global Institute for Leadership
Development with Warren Bennis. Mr. Harkins has consulted to numerous national
and international companies, particularly in the areas of strategy, competency
development, leadership development and team development, and has authored
several books and publications concerning those subjects. Mr. Harkins serves on
the Board of Directors of Keane and on the Board of Trustees for Merrimack
College. He received his bachelor's degree from Merrimack College, and master's
and doctorate degrees from Harvard University. Mr. Harkins is the brother of
James E. Harkins, Jr.
Larry R. Carr has served as our Chief Operating Officer since December 1997,
our Treasurer since September 1990 and a member of our Board of Directors since
May 1995. Previously, Mr. Carr served as our Chief Financial Officer from
September 1990 to May 1998, our Senior Vice President from May 1995 to December
1997, and our Vice President from September 1991 to May 1995. From 1987 to
1990, Mr. Carr was Vice President of Finance and Administration and a senior
member of the Executive Committee for Earl R. Flansburgh & Associates, Inc., an
architectural design firm. Mr. Carr has also held senior management positions
at Raytheon Company, a global electronics company, and Bolt, Beranek and
Newman, Inc., a consulting and technology development company. Mr. Carr
received a bachelor's degree from Northeastern University and a master's degree
from Boston College.
41
<PAGE>
Todd G. Langton joined us in January 1991 and has served as our Vice President
of Educational Programs and Products since January 1993. Previously, Mr.
Langton served as a director for Digital Consulting, Inc., a technology
exposition and conference company, from 1989 to 1991 and as the Associate
Director of Tufts University's European Center in Annecy, France from 1985 to
1989. Mr. Langton is a frequent author and speaker on the subject of direct
marketing strategy. Mr. Langton received a bachelor's degree from Tufts
University and has studied international law at the Geneva Institute in Geneva,
Switzerland.
David J. Giber joined us in November 1992 and has served as our Vice President
of Consulting since January 1993. From 1988 to 1992, Dr. Giber was a senior
manager for Digital Equipment Corporation, an international computer company.
His experience also includes training and development positions at Goldman,
Sachs & Co. from 1987 to 1988, New York Air from 1986 to 1987 and Keane from
1982 to 1986. Dr. Giber has designed numerous training programs on various
organizational development topics and has developed an expertise in competency
development, leadership development and workforce assessment. Dr. Giber
received a bachelor's degree from Stanford University and a doctorate degree
from Duke University.
John E. Doerr joined us in September 1998 as Vice President of College and
University Partnerships. From 1995 to 1998, Mr. Doerr served as the Managing
Director for Management Centre Europe, the European branch of the American
Management Association located in Brussels, Belgium. From 1984 to 1994, Mr.
Doerr held several managerial positions at the American Management Association,
including Senior Vice President of the On-Site Sales Division, Vice President
of Publications and Media and Director of the Training Products Division. Mr.
Doerr received a bachelor's degree from Boston College and a master's degree
from Boston University.
James E. Harkins, Jr. has served as a Vice President of Linkage since August
1988, with a current focus on directing the sales and marketing of our college
and university partnerships. From 1969 to 1988, Mr. Harkins held various
managerial positions in sales and marketing for the New York branch of the
Chevrolet Motor Division of General Motors, including Assistant Marketing
Manager, Branch Distribution Manager and District Manager. He received a
bachelor's degree from Boston College and has completed advanced programs in
marketing and management at the General Motors Institute. Mr. Harkins is the
brother of Philip J. Harkins.
Peter McKenzie has served as our Chief Financial Officer since May 1998. Prior
to that time, Mr. McKenzie was Corporate Controller of PolyMedica Industries,
Inc., a publicly traded medical products company, from February 1995 to May
1998; Vice President of Finance for Marpet Enterprises, Inc., a manufacturer of
semiconductor equipment, from December 1989 to February 1995; and Vice
President of Finance for Mech-El Industries, Inc., a manufacturer of
semiconductor equipment, from 1980 to 1989. Mr. McKenzie received a bachelor's
degree from Bentley College.
Warren Bennis has served as a member of our Board of Directors since August
1998. Since 1980, Mr. Bennis has been a Professor at the University of Southern
California, where he was founding chairman of the university's Leadership
Institute. Previously, Mr. Bennis served on the faculties of numerous colleges
and universities, including Harvard University, The Massachusetts Institute of
Technology, Boston University, INSEAD and Centre d'Etudes Industrielles in
Geneva, Switzerland. An expert on the subject of leadership, Mr. Bennis has
authored or edited over 20 books, including On Becoming A Leader, Leaders and
Co-Leaders. He also serves as Co-Chair with Philip J. Harkins of our Global
Institute for Leadership Development and is a frequent keynote speaker at our
conferences.
Wallace A. Cataldo has agreed to serve as a member of our Board of Directors
following the closing of this offering. Since 1985, Mr. Cataldo has been Vice
President, Finance and Administration, of Keane. He also served as Chief
Financial Officer of Keane from 1983 to 1985 and as Controller from 1978 to
1983. Mr. Cataldo received a bachelor's degree from Bentley College.
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<PAGE>
Our Board of Directors is divided into three classes, with the members of each
class serving for a staggered three-year term. Our Board currently consists of
one Class I Director (Mr. Bennis), one Class II Director (Mr. Carr) and one
Class III Director (Mr. Harkins). Mr. Cataldo has agreed to serve as a member
of our Board of Directors following this offering and will be a Class I
Director. 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 term of the Class I Director expires upon the
election and qualification of successor directors at the annual meeting of
stockholders held in 2000. The term of the Class II Director expires upon the
election and qualification of a successor director at the annual meeting of
stockholders held in 2001. The term of the Class III Director expires upon the
election and qualification of a successor director at the annual meeting of
stockholders held in 2002.
Each officer serves at the discretion of our Board of Directors and holds
office until his successor is elected and qualified or until his earlier
resignation or removal. Philip J. Harkins and James E. Harkins, Jr. are
brothers. Otherwise, there are no family relationships among any of our
directors or executive officers.
Committees of the Board of Directors
Our Board of Directors has a Compensation Committee initially composed of Mr.
Bennis, which makes recommendations concerning salaries and incentive
compensation for our employees and consultants and administers and grants
awards pursuant to our stock benefit plans. Our Board of Directors also has an
Audit Committee initially composed of Mr. Bennis, which reviews the results and
scope of the audit and other services provided by our independent public
accountants. Following this offering, the Board of Directors expects to appoint
Mr. Cataldo to serve as a member of the Compensation Committee and the Audit
Committee.
Director Compensation
Non-employee members of our Board of Directors receive a fee of $1,000 for each
Board of Directors meeting attended. All of our directors are reimbursed for
expenses incurred to attend Board of Directors and committee meetings. In
addition, our non-employee directors are eligible to receive stock options
under our 1999 Director Stock Option Plan. See " --Benefit Plans--1999 Director
Stock Option Plan." Mr. Bennis, one of our directors, is also a party to an
agreement pursuant to which he is compensated for his services as a speaker at
our programs and for assisting us in creating and delivering our programs,
services and products. See "Certain Transactions."
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<PAGE>
Executive Compensation
The following table sets forth the total compensation paid or accrued for in
1998 to our chief executive officer and our three other executive officers who
were serving as executive officers at December 31, 1998 and whose total salary
and bonus for such year exceeded $100,000 (collectively, the "Named Executive
Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
---------------------------
All Other
Name and Principal Position Salary Bonus Other(/1/) Compensation(/2/)
- --------------------------- -------- ------- ---------- -----------------
<S> <C> <C> <C> <C>
Philip J. Harkins................ $109,008 $22,750 $750,000 $ 9,566
President, Chief Executive
Officer and
Chairman of the Board
Larry R. Carr.................... 130,008 65,000 97,518 507,118
Chief Operating Officer
Todd G. Langton.................. 116,154 80,000 30,332 6,142
Vice President of Educational
Programs and Products
David J. Giber................... 126,000 65,000 59,370 5,988
Vice President of Consulting
</TABLE>
- -------------------------------
(/1/)Represents amounts accrued or distributed for Linkage-related federal
income tax obligations payable by the Named Executive Officer.
(/2/)Amounts shown in this column represent the aggregate value of: (a) a
special one-time payment made to one of the Named Executive Officers from the
proceeds of the litigation award described below under "Certain Transactions"
($500,000 for Mr. Carr); (b) our contributions on behalf of the Named
Executive Officers to our 401(k) Plan ($5,355 for Mr. Harkins, $5,850 for Mr.
Carr, $5,884 for Mr. Langton and $5,730 for Mr. Giber); and (c) premiums we
paid for term life insurance for the Named Executive Officers ($4,211 for Mr.
Harkins, $1,268 for Mr. Carr and $258 for each of Mr. Langton and Mr. Giber).
Stock Options
None of the Named Executive Officers was granted any stock options or stock
appreciation rights during 1998. No stock options or stock appreciation rights
were exercised in 1998 by the Named Executive Officers or were held by them at
year end.
Benefit Plans
1995 Stock Option Plan and 1999 Stock Incentive Plan. Our 1995 Stock Option
Plan was adopted by our Board of Directors and received stockholder approval in
May 1995. The 1995 plan authorized the issuance of up to 2,800,000 shares of
our common stock. As of March 12, 1999, options to purchase an aggregate of
133,280 shares of our common stock at a weighted average exercise price of
$7.34 per share were outstanding under the 1995 plan. No additional option
grants will be made under the 1995 plan.
Our 1999 Stock Incentive Plan was adopted by our Board of Directors and
received stockholder approval in March 1999. The 1999 plan is intended to
replace our 1995 plan. Up to 1,500,000 shares of our common stock (subject to
adjustment in the event of stock splits and other similar events) may be issued
pursuant to awards granted under the 1999 plan.
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<PAGE>
The 1999 plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code, nonstatutory stock
options, restricted stock awards and other stock-based awards.
Our officers, employees, directors, consultants and advisors and those of our
subsidiaries are eligible to receive awards under the 1999 plan. Under present
law, however, incentive stock options may only be granted to employees. No
participant may receive any award for more than 750,000 shares in any calendar
year.
Optionees receive the right to purchase a specified number of shares of our
common stock at a specified option price, subject to the terms and conditions
of the option grant. We may grant options at an exercise price less than, equal
to or greater than the fair market value of our common stock on the date of
grant. Under present law, incentive stock options and options intended to
qualify as performance-based compensation under Section 162(m) of the Internal
Revenue Code 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 of Linkage. The 1999 plan permits our
Board of Directors to determine how optionees may pay the exercise price of
their options, including by cash, check or in connection with a "cashless
exercise" through a broker, by surrender to us of shares of common stock, by
delivery to us of a promissory note, or by any combination of the permitted
forms of payment.
As of December 31, 1998, approximately 128 persons would have been eligible to
receive awards under the 1999 plan, including seven executive officers and one
non-employee director. The granting of awards under the 1999 plan is
discretionary.
Our Board of Directors administers the 1999 plan. Our Board of Directors has
the authority to adopt, amend and repeal the administrative rules, guidelines
and practices relating to the plan and to interpret its provisions. It may
delegate authority under the 1999 plan to one or more committees of the Board
of Directors and, subject to certain limitations, to one or more of our
executive officers. Our Board of Directors has authorized the Compensation
Committee to administer the 1999 plan, including the granting of options to our
executive officers. Subject to any applicable limitations contained in the 1999
plan, our Board of Directors, our Compensation Committee or any other committee
or executive officer to whom our Board of Directors delegates authority, as the
case may be, selects the recipients of awards and determines:
. the number of shares of common stock covered by options and the dates
upon which such options become exercisable;
. the exercise price of options;
. the duration of options; and
. the number of shares of common stock subject to any restricted stock or
other stock-based awards and the terms and conditions of such awards,
including the conditions for repurchase, issue price and repurchase
price.
In the event of a merger, liquidation or other acquisition event, our Board of
Directors is authorized to provide for outstanding options or other stock-based
awards to be assumed or substituted for by the acquiror. If the acquiror
refuses to assume or substitute for outstanding awards, they will accelerate
and become fully exercisable and free of restrictions, prior to consummation of
the acquisition event. In addition, following an acquisition event, under
certain circumstances, an assumed
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<PAGE>
or substituted award will accelerate if the employment of its holder with the
acquiror is terminated within one year of the acquisition event.
No award may be granted under the 1999 plan after March 2009, but the vesting
and effectiveness of awards previously granted may extend beyond that date. Our
Board of Directors may at any time amend, suspend or terminate the 1999 plan,
except that no award granted after an amendment of the 1999 plan and designated
as subject to Section 162(m) of the Internal Revenue Code by our Board of
Directors shall become exercisable, realizable or vested, to the extent such
amendment was required to grant such award, unless and until such amendment is
approved by our stockholders.
1999 Director Stock Option Plan. Our 1999 Director Stock Option Plan was
adopted by our Board of Directors and received stockholder approval in March
1999. Under the terms of the director plan, directors who are not employees of
Linkage or any subsidiary of Linkage receive nonstatutory options to purchase
shares of our common stock. A total of 150,000 shares of our common stock may
be issued upon exercise of options granted under the plan.
Under the terms of the director plan, each non-employee director continuing as
a director following this offering will receive an option to purchase 8,000
shares of our common stock on the effective date of this offering at a price
per share equivalent to the initial public offering price. In addition, each
such non-employee director will receive an option to purchase 4,000 shares of
our common stock on the date of each annual meeting of stockholders commencing
with the 2000 Annual Meeting of Stockholders, at an exercise price per share
equal to the closing price of our common stock on the date of grant. In
addition, individuals who become directors after this offering and are not our
employees will receive an option to purchase 8,000 shares of our common stock
on the date of his or her initial election to our Board of Directors and an
option to purchase 4,000 shares of our common stock on the date of each annual
meeting of stockholders after his or her election. The exercise price per share
of such options will be the closing price per share of our common stock on the
date of grant. All options granted under the director plan vest one year from
the date of grant so long as the optionee remains a director.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan was
adopted by our Board of Directors and received stockholder approval in March
1999. The purchase plan authorizes the issuance of up to a total of 250,000
shares of our common stock to participating employees.
All of our employees, including our directors who are employees, and all
employees of any participating subsidiaries, whose customary employment is more
than 20 hours per week and for more than five months in any calendar year, are
eligible to participate in the purchase plan. Employees who would immediately
after the grant own 5% or more of the total combined voting power or value of
our stock or that of any subsidiary are not eligible to participate. As of
December 31, 1998, approximately 90 of our employees would have been eligible
to participate in the purchase plan.
On the first day of a designated payroll deduction period (the "Offering
Period"), we will grant to each eligible employee who has elected to
participate in the purchase plan an option to purchase shares of our common
stock as follows: the employee may authorize between 1% to 10% of his or her
base pay to be deducted by us from his or her base pay during the Offering
Period. On the last day of this Offering Period, the employee is deemed to have
exercised the option, at the option exercise price, to the extent of
accumulated payroll deductions. Under the terms of the purchase plan, the
option price is an amount equal to 85% of the average market price (as defined
in the purchase plan) per share of our common stock on either the first day or
the last day of the Offering Period, whichever is lower. The first Offering
Period under the purchase plan will commence on the date on which trading of
our common stock commences on the Nasdaq National Market, with the option price
on the first day of
46
<PAGE>
such Offering Period equivalent to the initial public offering price. In no
event may an employee purchase in any one Offering Period a number of shares
that exceeds the number of shares determined by dividing $12,500 by the average
market price of a share of our common stock on the commencement date of the
Offering Period. Our Compensation Committee may, in its discretion, choose an
Offering Period of 12 months or less for each offering and choose a different
Offering Period for each offering.
An employee who is not a participant on the last day of the Offering Period is
not entitled to exercise any option, and the employee's accumulated payroll
deductions will be refunded. An employee's rights under the purchase plan
terminate upon voluntary withdrawal from the purchase plan at any time, or when
the employee ceases employment for any reason, except that upon termination of
employment because of death, the employee's beneficiary has certain rights to
elect to exercise the option to purchase the shares which the accumulated
payroll deductions in the participant's account would purchase at the date of
death.
Because participation in the purchase plan is voluntary, we cannot now
determine the number of shares of our common stock to be purchased by any of
our current executive officers, by all of our current executive officers as a
group or by our non-executive employees as a group.
401(k) Plan. In January 1994, we adopted an employee savings and retirement
plan qualified under Section 401 of the Internal Revenue Code and covering all
of our employees. Pursuant to the 401(k) plan, employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit and
have the amount of such reduction contributed to the 401(k) plan. We may make
matching or additional contributions to the 401(k) plan in amounts to be
determined annually by our Board of Directors.
Compensation Committee Interlocks and Insider Participation
The current member of the Compensation Committee of our Board of Directors is
Mr. Bennis. Mr. Cataldo will become a member of the Compensation Committee upon
his election to our Board of Directors after the closing of this offering. Mr.
Cataldo is the Vice President, Finance and Administration, of Keane and Philip
J. Harkins serves as a member of the Board of Directors of Keane. No other
executive officer has served as a director or member of the compensation
committee (or other committee serving an equivalent function) of any other
entity whose executive officers served as a director or member of the
Compensation Committee of our Board of Directors.
47
<PAGE>
CERTAIN TRANSACTIONS
In February 1995, we entered into an agreement and assignment with Philip J.
Harkins & Associates, Inc., a corporation wholly owned by Philip J. Harkins,
our President, Chief Executive Officer and Chairman of the Board. Pursuant to
the agreement and assignment, we assigned to Philip J. Harkins & Associates all
of our right, title and interest in and to a jury award in the amount of $6.0
million resulting from certain litigation involving Linkage. At the time of the
claim giving rise to this litigation, Mr. Harkins was our sole stockholder. At
the time of the assignment, the jury award was the subject of a pending appeal.
During the course of the litigation, we made payments of certain professional
fees in the aggregate amount of $75,650 in connection with the litigation on
behalf of Philip J. Harkins & Associates. Philip J. Harkins & Associates repaid
these amounts in full to us in February 1998.
We are a party to a services agreement with Warren Bennis, one of our
directors. Under this agreement, Mr. Bennis assists us in creating and
delivering programs, services and products. Among other duties, Mr. Bennis
serves as co-chair of our Global Institute for Leadership Development and
presents keynote addresses at four additional Linkage conferences per year. Mr.
Bennis will receive a total of $500,000 under this agreement, paid in
installments of approximately $21,000 per month during its term. The agreement
with Mr. Bennis expires on December 31, 1999.
In connection with the termination of our S corporation status, we will enter
into a tax indemnification agreement with each of the stockholders receiving a
portion of the S corporation dividend. Under this agreement, each stockholder
will continue to be liable for his or her income taxes on our income for all
periods prior to the date we terminate our S corporation status, and we will be
liable for all income taxes subsequent to that date. The agreement provides
that we will indemnify each stockholder for any increase in personal income tax
liability resulting from adjustments initiated by taxing authorities which
result in a decrease in our income tax liability. Our indemnification is
limited to the amount of our decrease in income tax liability. The agreement
also provides that each stockholder will pay to us an amount equal to any
decrease in personal income tax liability resulting from adjustments initiated
by taxing authorities which result in an increase in our income tax liability.
In addition, pursuant to this agreement, if we are determined to have been a C
corporation for tax purposes at any time we reported our income as an S
corporation, the stockholders will make a capital contribution to us in an
amount necessary to hold us harmless from any taxes and interest arising from
such determination, up to the amount of distributions made by us to the
stockholders prior to the date we terminate our S corporation status, less any
taxes and interest attributable to such distributions net of any taxes
refunded.
We have adopted a policy providing that all material transactions between us
and our officers, directors and other affiliates must be (a) approved by a
majority of the members of our Board of Directors and by a majority of the
disinterested members of our Board of Directors and (b) on terms no less
favorable to us than could be obtained from unaffiliated third parties.
48
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of December 31, 1998, and as adjusted to
reflect the sale of the shares of common stock in this offering, by:
. each person we know to own beneficially more than 5% of our common
stock;
. each of our directors and nominees for director;
. each of the Named Executive Officers;
. all directors, nominees for director and executive officers as a group;
and
. each of the other selling stockholders.
To our knowledge, none of these persons has a relationship with any of the
underwriters or their respective affiliates. Unless otherwise indicated, each
person named in the table has sole voting power and investment power, or shares
such power with his or her spouse, with respect to all shares of capital stock
listed as owned by such person. The address of each of our officers and
directors is c/o Linkage Solutions, Inc., One Forbes Road, Lexington,
Massachusetts 02421.
<TABLE>
<CAPTION>
Shares to be
Shares Beneficially Beneficially
Owned Prior to Shares Being Owned After
Offering Offered Offering(/1/)
---------------------------------- --------------
Name of Beneficial Owner Number Percent Number Number Percent
- ------------------------ ----------- ---------------------- ------ -------
<S> <C> <C> <C> <C> <C>
Philip J. Harkins............. 4,827,200 76.3%
Larry R. Carr................. 728,000 11.5%
Todd G. Langton............... 315,280 5.0%
David J. Giber................ 360,640 5.7%
James E. Harkins, Jr.......... 61,600 1.0%
Warren Bennis................. -- -- -- -- --
Wallace A. Cataldo............ -- -- -- -- --
All executive officers,
directors and nominees for
director as a group
(9 persons).................. 6,292,720 99.4%
</TABLE>
- -------------------------------
*Less than 1%
(/1/)Assumes no exercise of the underwriters' over-allotment option.
Under the rules of the SEC, beneficial ownership includes any shares as to
which an individual has sole or shared voting or investment power and any
shares as to which the individual has the right to acquire beneficial ownership
within 60 days after December 31, 1998 through the exercise of any stock option
or other right. The inclusion of shares in this table, however, does not
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of the shares for any other purpose.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 30,000,000 shares of common stock, $.01 par value
per share, and 2,000,000 shares of preferred stock, $.01 par value per share.
As of March 12, 1999, we had outstanding (a) 6,334,160 shares of common stock
held by 14 stockholders of record and (b) options to purchase an aggregate of
133,280 shares of our common stock.
The following summary of certain provisions of our common stock, preferred
stock, certificate of incorporation and by-laws is not intended to be complete.
It is qualified by reference to the provisions of applicable law and to our
certificate of incorporation and by-laws included as exhibits to the
registration statement of which this prospectus is a part. See "Where You Can
Find More Information."
Common Stock
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any dividends as may be declared by our Board of Directors,
subject to any preferential dividend rights of outstanding preferred stock.
Upon our liquidation, dissolution or winding up, the holders of common stock
are entitled to receive proportionately our net assets available after the
payment of all debts and other liabilities and subject to the prior rights of
any outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. Our outstanding shares of common
stock are, and the shares offered by us in this offering will be, when issued
and paid for, fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock which we may designate and issue in the future.
Preferred Stock
Under the terms of our certificate of incorporation, our Board of Directors is
authorized to issue shares of preferred stock in one or more series without
stockholder approval. Our Board of Directors has the discretion to determine
the rights, preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, of each series of preferred stock.
The purpose of authorizing our Board of Directors to issue preferred stock and
determine its rights and preferences is to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or could discourage a third party from acquiring, a
majority of our outstanding voting stock. We have no present plans to issue any
shares of preferred stock.
Delaware Law and Certain Charter and By-Law Provisions
We are subject to the provisions of Section 203 of the General Corporation Law
of Delaware. Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the person became an interested stockholder, unless
the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the interested stockholder. Subject to certain
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within the prior three years did own, 15%
or more of the corporation's voting stock.
50
<PAGE>
Our certificate of incorporation divides our Board of Directors into three
classes with staggered three-year terms. See "Management." In addition, our
certificate of incorporation provides that directors may be removed only for
cause by the affirmative vote of the holders of two-thirds of our shares of
capital stock entitled to vote. Under our certificate of incorporation, any
vacancy on our Board of Directors, including a vacancy resulting from an
enlargement of our Board of Directors, may only be filled by the vote of a
majority of our directors then in office. The classification of our Board of
Directors and the limitations on the removal of directors and filling of
vacancies could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, control of Linkage.
Our certificate of incorporation also provides that any action required or
permitted to be taken by our stockholders at an annual meeting or special
meeting of stockholders may only be taken if it is properly brought before such
meeting and may not be taken by written action in lieu of a meeting. Our
certificate of incorporation further provides that special meetings of the
stockholders may only be called by our Chairman of the Board, President or
Board of Directors. Under our by-laws, in order for any matter to be considered
"properly brought" before a meeting, a stockholder must comply with certain
advance notice requirements. These provisions could have the effect of delaying
until the next stockholders' meeting stockholder actions that are favored by
the holders of a majority of our outstanding voting securities. These
provisions may also discourage a third party from making a tender offer for our
common stock, because even if it acquired a majority of our outstanding voting
securities, the third party would be able to take action as a stockholder (such
as electing new directors or approving a merger) only at a duly called
stockholders' meeting, and not by written consent.
The General Corporation Law of Delaware provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or by-laws, unless a
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage. Our certificate of incorporation and by-laws
require the affirmative vote of the holders of at least 75% of the shares of
our capital stock issued and outstanding and entitled to vote to amend or
repeal any of the provisions described in the prior two paragraphs.
Our certificate of incorporation contains provisions permitted under the
General Corporation Law of Delaware relating to the liability of directors.
These provisions eliminate a director's liability for monetary damages for a
breach of fiduciary duty, except in certain circumstances involving wrongful
acts, such as the breach of a director's duty of loyalty or acts or omissions
that involve intentional misconduct or a knowing violation of law. Further, our
certificate of incorporation contains provisions to indemnify our directors and
officers to the fullest extent permitted by the General Corporation Law of
Delaware. We believe that these provisions will assist us in attracting and
retaining qualified individuals to serve as directors.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is BankBoston, N.A.
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our securities. After
we complete this offering, based upon the number of shares outstanding at
December 31, 1998, there will be shares of our common stock outstanding
(assuming no exercise of the underwriters' over-allotment option and no
exercise of outstanding options to purchase common stock). Of these outstanding
shares, the shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act of 1933, except
that any shares purchased by our "affiliates," as that term is defined in Rule
144 under the Securities Act, may generally only be sold in compliance with the
limitations of Rule 144 described below.
Sales of Restricted Shares
The remaining 6,334,160 shares of common stock outstanding after this offering
are deemed "restricted securities" under Rule 144. Of these restricted
securities:
. approximately 17,360 shares will be eligible for sale in the public
market immediately following this offering pursuant to Rule 144(k)
under the Securities Act;
. approximately 24,080 shares will be eligible for sale in the public
market in accordance with Rule 144 or Rule 701 under the Securities Act
beginning 90 days after the date of this prospectus; and
. approximately 6,292,720 shares will be eligible for sale in the public
market, subject to the provisions of Rule 144 under the Securities Act,
upon expiration of lock-up agreements with representatives of the
underwriters 180 days after the date of this prospectus.
Our executive officers and directors, who in the aggregate hold approximately
6,292,720 shares, or approximately 99%, of our common stock prior to this
offering, have agreed that, for a period of 180 days after the date of this
prospectus, they will not sell, consent to sell or otherwise dispose of any
shares of our common stock, or any shares convertible into or exchangeable for
shares of our common stock, owned directly by such persons or with respect to
which they have the power of disposition, without the prior written consent of
U.S. Bancorp Piper Jaffray, acting on behalf of the representatives of the
underwriters.
In general, under Rule 144 a stockholder who has beneficially owned his or her
restricted securities 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 our common stock (approximately shares immediately after this
offering) or the average weekly trading volume in our common stock during the
four calendar weeks preceding the date on which notice of such sale was filed
under Rule 144, provided certain requirements concerning availability of public
information, manner of sale and notice of sale are satisfied. In addition, a
stockholder that is not one of our affiliates at any time during the three
months preceding a sale and who has beneficially owned the shares proposed to
be sold for at least two years is entitled to sell the shares immediately under
Rule 144(k) without compliance with the above described requirements under Rule
144.
Securities issued in reliance on Rule 701 (such as shares of our common stock
acquired pursuant to the exercise of options granted under our stock plans) are
also restricted securities and, beginning 90 days after the date of this
prospectus, may be sold by stockholders other than our affiliates subject only
to the manner of sale provisions of Rule 144 and by affiliates under Rule 144
without compliance with its one-year holding period requirement.
52
<PAGE>
Stock Options
We intend to file registration statements on Form S-8 under the Securities Act
to register all shares of common stock issuable under our stock plans. In
particular, we intend to file registration statements on Form S-8 with respect
to the aggregate of 400,000 shares of common stock issuable under the director
plan and the employee stock purchase plan promptly following the consummation
of this offering and intend to file registration statements on Form S-8
relating to the aggregate of 1,634,400 shares of common stock issuable under
the 1995 plan and the 1999 plan following the 90th day after the date of this
prospectus. Shares issued upon the exercise of stock options after the
effective date of the Form S-8 registration statements will be eligible for
resale in the public market without restriction, subject to Rule 144
limitations applicable to affiliates and the lock-up agreements noted above, if
applicable.
Effect of Sales of Shares
Prior to 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 market sales of
shares of common stock or the availability of shares for sale will have on the
market price of our common stock prevailing from time to time. Nevertheless,
sales of significant numbers of shares of our common stock in the public market
could cause the market price of our common stock to decline and could impair
our future ability to raise capital through an offering of our equity
securities.
53
<PAGE>
UNDERWRITING
The underwriters named below have agreed to buy, subject to the terms of the
purchase agreement, the number of shares listed opposite their names below. The
underwriters are committed to purchase and pay for all of the shares if any are
purchased.
<TABLE>
<CAPTION>
Number
Underwriters Of Shares
------------ ---------
<S> <C>
U.S. Bancorp Piper Jaffray Inc. ................................
BancBoston Robertson Stephens Inc. .............................
----
Total...........................................................
====
</TABLE>
The underwriters have advised us and the selling stockholders that they propose
to offer the shares to the public at $ per share. The underwriters propose to
offer the shares to certain dealers at the same price less a concession of not
more than $ per share. The underwriters may allow and the dealers may reallow
a concession of not more than $ per share on sales to certain other brokers
and dealers. After the offering, these figures may be changed by the
underwriters.
We have granted to the underwriters an option to purchase up to an additional
shares of common stock from us at the same price to the public, and with
the same underwriting discount, as set forth in the paragraph above. The
underwriters may exercise this option any time during the 30-day period after
the date of this prospectus, but only to cover over-allotments, if any. To the
extent the underwriters exercise the option, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of the additional shares as it was obligated to purchase under the
purchase agreement.
The following table shows the underwriting fees to be paid to the underwriters
by us and the selling stockholders in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of the over-
allotment option.
Paid by Linkage
<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per share....................................... $ $
Total........................................... $ $
</TABLE>
Paid by the Selling Stockholders
<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per share....................................... $ $
Total........................................... $ $
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be approximately $1,250,000, all of which we
will pay.
We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or to contribute to payments that the underwriters may be required to make
in respect of those liabilities.
54
<PAGE>
We and each of our directors, executive officers and the selling stockholders
have agreed to certain restrictions on their ability to sell additional shares
of our common stock for a period of 180 days after the date of this prospectus.
We have agreed not to directly or indirectly offer for sale, sell, contract to
sell, grant any option for the sale of, or otherwise issue or dispose of, any
shares of our common stock, options or warrants to acquire shares of our common
stock, or any related security or instrument, without the prior written consent
of U.S. Bancorp Piper Jaffray. The agreements provide exceptions for (a) sales
to underwriters pursuant to the purchase agreement, (b) our sales in connection
with the exercise of options granted and the granting of options to purchase
additional shares under our existing stock option plans and (c) donative and
estate planning transactions.
Prior to this offering, there has been no established trading market for our
common stock. The initial public offering price for the shares of our common
stock offered by this prospectus will be negotiated by us, the selling
stockholders and the underwriters. The factors to be considered in determining
the initial public offering price include the history of and prospects for the
industry in which we compete, our past and present operations, our historical
results of operations, our prospects for future earnings, the recent market
prices of securities of generally comparable companies, the general condition
of the securities markets at the time of this offering and other relevant
factors. There can be no assurance that the initial public offering price of
our common stock will correspond to the price at which our common stock will
trade in the public market subsequent to this offering or that an active public
market for our common stock will develop and continue after this offering.
To facilitate the offering, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of our common stock during
and after the offering. Specifically, the underwriters may over-allot or
otherwise create a short position in our common stock for their own account by
selling more shares of common stock than have been sold to them by us and the
selling stockholders. The underwriters may elect to cover any such short
position by purchasing shares of our common stock in the open market or by
exercising the over-allotment option granted to the underwriters. In addition,
the underwriters may stabilize or maintain the price of our common stock by
bidding for or purchasing shares of our common stock in the open market and may
impose penalty bids. If penalty bids are imposed, selling concessions allowed
to syndicate members or other broker-dealers participating in the offering are
reclaimed if shares of our common stock previously distributed in the offering
are repurchased, whether in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of our common stock at a level above that which might otherwise
prevail in the open market. The imposition of a penalty bid may also affect the
price of our common stock to the extent that it discourages resales of our
common stock. The magnitude or effect of any stabilization or other
transactions is uncertain. These transactions may be effected on the Nasdaq
National Market or otherwise and, if commenced, may be discontinued at any
time.
55
<PAGE>
VALIDITY OF COMMON STOCK
The validity of the shares of common stock offered under this prospectus by
Linkage and the selling stockholders will be passed upon for Linkage by Hale
and Dorr LLP, Boston, Massachusetts, and for the underwriters by Ropes & Gray,
Boston, Massachusetts.
EXPERTS
The consolidated financial statements included in this prospectus and the
related financial statement schedule included elsewhere in the registration
statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the common
stock we are offering by this prospectus. This prospectus does not include all
of the information contained in the registration statement. You should refer to
the registration statement and its exhibits for additional information.
Whenever we make reference in this prospectus to any of our contracts,
agreements or other documents, the references are not necessarily complete and
you should refer to the exhibits attached to the registration statement for
copies of the actual contract, agreement or other document. When we complete
this offering, we will also be required to file annual, quarterly and special
reports, proxy statements and other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at
450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, Suite
1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of these
documents at prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
facilities. Our SEC filings are also available at the office of the Nasdaq
National Market. For further information on obtaining copies of our public
filings at the Nasdaq National Market, you should call (212) 656-5060.
56
<PAGE>
LINKAGE SOLUTIONS, INC.
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998.............. F-3
Consolidated Statements of Operations for the years ended December 31,
1996,
1997 and 1998............................................................ F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1996,
1997 and 1998............................................................ F-5
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996,
1997 and 1998............................................................ F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
The following report is in the form that will be signed upon completion of the
reorganization and the exchange of shares discussed in note 2 to the
consolidated financial statements, assuming that from March 11, 1999 to the
date of such completion, no other material events have occurred that would
affect the accompanying consolidated financial statements or required
disclosure therein. If the share exchange ratio changes, all references to
numbers of shares, per share amounts and stock option data included within the
consolidated financial statements will also change.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 12, 1999
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Linkage Solutions, Inc.:
We have audited the accompanying consolidated balance sheets of Linkage
Solutions, Inc. and subsidiaries (the "Company") as of December 31, 1997 and
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended 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 consolidated 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.
Boston, Massachusetts
March 11, 1999, except for
note 2, as to which the
date is , 1999
F-2
<PAGE>
LINKAGE SOLUTIONS, INC.
Consolidated Balance Sheets
December 31, 1997 and 1998
<TABLE>
<CAPTION>
December 31,
-----------------------------------
Pro forma
Assets 1997 1998 1998
------ ---------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............... $4,082,238 $ 3,393,310 $ --
Accounts receivable, net of allowance
for doubtful accounts of $312,000 and
$419,000 in 1997 and 1998.............. 1,908,075 4,889,457 1,453,885
Prepaid expenses and other current
assets................................. 864,235 2,071,409 2,071,409
---------- ----------- -----------
Total current assets.................. 6,854,548 10,354,176 3,525,294
---------- ----------- -----------
Property and equipment--net............... 467,110 1,056,947 1,056,947
Goodwill--net............................. -- 633,401 633,401
---------- ----------- -----------
Total assets.............................. $7,321,658 $12,044,524 $ 5,215,642
========== =========== ===========
Liabilities and stockholders' equity
(deficit)
------------------------------------
Current liabilities:
Line of credit.......................... $ -- $ -- $ 2,471,118
Accounts payable........................ 298,108 1,452,633 1,452,633
Deferred program revenue................ 673,467 870,354 870,354
Accrued personnel costs................. 338,161 313,198 313,198
Income tax payable...................... 224,729 508,472 508,472
Deferred income tax..................... 111,238 192,875 192,875
Other accrued liabilities............... 97,091 187,762 187,762
---------- ----------- -----------
Total current liabilities............. 1,742,794 3,525,294 5,996,412
---------- ----------- -----------
Long term liability:
Accrued acquisition liability........... -- 250,000 250,000
---------- ----------- -----------
Total liabilities......................... 1,742,794 3,775,294 6,246,412
---------- ----------- -----------
Commitments and contingencies (note 14)
Stockholders' equity (deficit):
Preferred stock, $0.01 par value--
authorized 2,000,000 shares; none
issued or outstanding.................. -- -- --
Common stock, $0.01 par value--
authorized 30,000,000 shares; issued
and outstanding 6,312,880 and 6,334,160
in 1997 and 1998....................... 63,129 63,341 63,341
Additional paid-in capital
(deficiency)........................... 897,116 1,056,593 (1,062,740)
Accumulated other comprehensive income
(loss)................................. 13,761 (31,371) (31,371)
Retained earnings....................... 4,604,858 7,180,667 --
---------- ----------- -----------
Total stockholders' equity (deficit)...... 5,578,864 8,269,230 (1,030,770)
---------- ----------- -----------
Total liabilities and stockholders'
equity................................... $7,321,658 $12,044,524 $ 5,215,642
========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
LINKAGE SOLUTIONS, INC.
Consolidated Statements of Operations
Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues.................................. $10,733,089 $17,549,621 $24,274,118
Cost of revenues.......................... 5,849,460 9,840,552 13,168,879
----------- ----------- -----------
Gross profit.............................. 4,883,629 7,709,069 11,105,239
----------- ----------- -----------
Operating expense:
Sales and marketing..................... 1,860,486 3,144,776 4,151,630
General and administrative.............. 1,452,790 2,208,427 3,036,253
Stock-based compensation................ 4,066 377,659 78,657
Settlement bonuses...................... -- -- 1,021,500
----------- ----------- -----------
Total operating expense............... 3,317,342 5,730,862 8,288,040
----------- ----------- -----------
Income from operations.................... 1,566,287 1,978,207 2,817,199
----------- ----------- -----------
Other income:
Interest income, net.................... 69,549 123,559 186,525
Litigation settlement................... -- -- 7,361,184
----------- ----------- -----------
Total other income.................... 69,549 123,559 7,547,709
----------- ----------- -----------
Income before income taxes................ 1,635,836 2,101,766 10,364,908
Income tax provision...................... 193,000 172,000 460,000
----------- ----------- -----------
Net income................................ 1,442,836 1,929,766 9,904,908
Preferential distribution................. -- -- 6,339,684
----------- ----------- -----------
Net income available to common
stockholders............................. $ 1,442,836 $ 1,929,766 $ 3,565,224
=========== =========== ===========
Basic and diluted net income per common
share.................................... $ 0.23 $ 0.31 $ 0.56
Basic weighted average shares
outstanding.............................. 6,143,200 6,300,919 6,327,279
Diluted weighted average shares
outstanding.............................. 6,148,612 6,324,149 6,375,026
</TABLE>
Pro Forma Data (unaudited):
<TABLE>
<S> <C>
Net income available to common stockholders......................... $3,565,224
Pro forma incremental C Corporation income tax provision............ 997,000
----------
Pro forma net income available to common stockholders............... $2,568,224
==========
Pro forma basic net income per common share......................... $ 0.37
Pro forma basic weighted average shares outstanding................. 7,035,612
Pro forma diluted net income per common share....................... $ 0.36
Pro forma diluted weighted average shares outstanding............... 7,083,359
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
LINKAGE SOLUTIONS, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $1,442,836 $1,929,766 $ 9,904,908
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization......... 54,924 97,952 213,703
Stock-based compensation.............. 4,066 377,659 78,657
Settlement bonuses.................... -- -- 1,021,500
Litigation settlement................. -- -- (7,361,184)
Deferred income tax................... 34,164 77,074 76,523
(Increase) decrease, net of purchase
of High Technologies, in:
Accounts receivable................. 986,392 (529,123) (2,887,066)
Prepaid expenses and other current
assets............................. (248,589) (468,215) (1,204,387)
Accounts payable.................... 307,508 (107,407) 1,148,526
Deferred program revenue............ (2,196) 297,346 196,887
Accrued personnel costs............. 81,595 157,002 (27,642)
Income tax payable.................. 159,002 65,727 261,833
Other accrued liabilities........... 104,907 (75,139) 117,694
---------- ---------- -----------
Net cash provided by operating
activities......................... 2,924,609 1,822,642 1,539,952
---------- ---------- -----------
Cash flows from investing activities:
Purchases of property and equipment..... (187,634) (319,464) (772,782)
Purchase of High Technologies, net of
cash acquired.......................... -- -- (502,583)
---------- ---------- -----------
Net cash used in investing
activities......................... (187,634) (319,464) (1,275,365)
---------- ---------- -----------
Cash flows from financing activities:
Exercise of stock option................ -- 4,180 5,382
Contribution from stockholder........... -- -- 75,650
Subchapter S distributions.............. (60,241) (244,435) (989,415)
---------- ---------- -----------
Net cash used in financing
activities......................... (60,241) (240,255) (908,383)
---------- ---------- -----------
Net increase (decrease) in cash and cash
equivalents.............................. 2,676,734 1,262,923 (643,796)
Effect of foreign currency translation on
cash balances............................ 37,601 (23,840) (45,132)
Cash and cash equivalents, beginning of
period................................... 128,820 2,843,155 4,082,238
---------- ---------- -----------
Cash and cash equivalents, end of period.. $2,843,155 $4,082,238 $ 3,393,310
========== ========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for income
taxes.................................. $ -- $ 108,000 $ 124,000
========== ========== ===========
</TABLE>
Supplemental schedule of non-cash investing activities:
The company acquired High Technologies for $502,283 and an acquisition
liability of $250,000. In conjunction with the acquisition, liabilities were
assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired.................................. $ 135,926
Cash paid for assets........................................... (510,094)
----------
Liabilities assumed............................................ $ (374,168)
==========
Supplemental schedule of other non-cash activities:
Settlement bonuses............................................. $1,021,500
Litigation settlement.......................................... 7,361,184
Preferential distribution...................................... 6,339,684
==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
LINKAGE SOLUTIONS, INC.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1996, 1997 and 1998
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Stockholders' Comprehensive
Shares Amount Capital Income (Loss) Earnings Equity Income
--------- ------- ---------- ------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1996................... 6,143,200 $61,432 $ 512,908 $ -- $1,536,932 $2,111,272
Stock-based
compensation.......... -- -- 4,066 -- -- 4,066
Subchapter S
distribution.......... -- -- -- -- (60,241) (60,241)
Comprehensive income:
Net income........... -- -- -- -- 1,442,836 1,442,836 $ 1,442,836
Foreign currency
translation
adjustment.......... -- -- -- 37,601 -- 37,601 37,601
--------- ------- ---------- ------------ ---------- ---------- --------------
Comprehensive income... $ 1,480,437
==============
Balance, December 31,
1996................... 6,143,200 61,432 516,974 37,601 2,919,527 3,535,534
Issuance of common
stock and related
stock-based
compensation.......... 164,080 1,641 314,506 -- -- 316,147
Stock-based
compensation.......... -- -- 61,512 -- -- 61,512
Subchapter S
distribution.......... -- -- -- -- (244,435) (244,435)
Exercise of stock
options............... 5,600 56 4,124 -- -- 4,180
Comprehensive income:
Net income........... 1,929,766 1,929,766 $ 1,929,766
Foreign currency
translation
adjustment.......... -- -- -- (23,840) -- (23,840) (23,840)
--------- ------- ---------- ------------ ---------- ---------- --------------
Comprehensive income... $ 1,905,926
==============
Balance, December 31,
1997................... 6,312,880 63,129 897,116 13,761 4,604,858 5,578,864
Issuance of common
stock and related
stock-based
compensation.......... 12,320 123 54,877 -- 55,000
Stock-based
compensation.......... 23,657 -- 23,657
Subchapter S
distribution.......... (989,415) (989,415)
Contribution from
stockholder........... 75,650 75,650
Exercise of stock
options............... 8,960 89 5,293 -- 5,382
Comprehensive income:
Net income........... -- -- -- -- 9,904,908 9,904,908 $ 9,904,908
Preferential
distribution........ -- -- -- -- (6,339,684) (6,339,684)
Foreign currency
translation
adjustment.......... -- -- -- (45,132) -- (45,132) (45,132)
--------- ------- ---------- ------------ ---------- ---------- --------------
Comprehensive income... $9,859,776
==============
Balance, December 31,
1998................... 6,334,160 $63,341 $1,056,593 $ (31,371) $7,180,667 $8,269,230
========= ======= ========== ============ ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements
1. Nature of business
Linkage Solutions, Inc. (the "Company") is a provider of organizational
development and corporate education programs, services and products designed to
improve the efficiency, effectiveness and productivity of individual employees
and organizations.
2. Reorganization and principles of consolidation
Reorganization--The Company was incorporated in Delaware on March 9, 1999 as a
wholly owned subsidiary of Linkage, Inc. ("Linkage"), a Massachusetts
corporation founded in 1988. In connection with a proposed initial public
offering ("IPO") of shares of the Company's stock, on , 1999, each
stockholder of Linkage was issued 560 shares of the Company's common stock for
each share of Linkage stock held by such shareholder and Linkage became a
wholly owned subsidiary of the Company. Additionally, each outstanding option
to purchase one share of Linkage common stock was exchanged for an option to
purchase 560 shares of the Company's common stock. Accordingly, all references
in the financial statements to number of shares, per share amounts, and stock
option data of the Company's common stock have been restated to reflect the
effect of the 560-for-one share exchange.
In anticipation of the IPO, the Company will terminate its status as an S
corporation and declare a dividend (the "S Corporation Dividend"). Such
dividend is expected to be approximately $8.5 million. Accordingly, the Company
will then be taxed as a C corporation and will recognize income for income tax
purposes on an accrual basis.
Principles of consolidation--Linkage International Ltd. ("Linkage
International"), now a wholly owned subsidiary of Linkage, was incorporated in
the U.K. in April 1996 by Linkage's controlling stockholder to provide
conferences and consulting services to clients in Europe. Effective January 1,
1997, the stockholder contributed the common stock of Linkage International to
Linkage. As a result of the common control, the financial statements of Linkage
International have been consolidated with those of Linkage for all periods
since the incorporation of Linkage International.
In August 1998, the Company acquired High, Maley, and Milhorn, Inc. doing
business as High Technologies ("High Technologies") which was accounted for as
a purchase and, accordingly, the results of operations of High Technologies
have been consolidated from August 1998. (See note 5.)
All material intercompany transactions have been eliminated in consolidation.
3. Pro forma information (unaudited)
Pro forma consolidated balance sheet--The pro forma unaudited consolidated
balance sheet as of December 31, 1998 reflects the termination of the Company's
S Corporation status and the payment of the S Corporation Dividend, as if it
were to be paid at that date by a distribution of cash and certain accounts
receivable balances and a planned tax-related distribution (expected to be
$1,000,000). A reduction in stockholders' equity is reflected as a result of
the S Corporation Dividend, the tax-related distribution and the Subchapter S
termination.
Pro forma consolidated income statement data--An unaudited pro forma adjustment
to include an incremental income tax provision, assuming an effective tax rate
of 40%, has been made to the historical results of operations to make the pro
forma presentation comparable to what would have been reported had the Company
operated as a C Corporation.
F-7
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
3. Pro forma information (unaudited)--continued
The Company has adopted the provisions of SFAS No. 128, "Earnings Per Share,"
for purposes of presenting pro forma basic and diluted net income per common
share. The denominator used to determine basic net income per share includes
the weighted average common shares outstanding for the year and the number of
shares required to pay the S Corporation Dividend. The denominator used to
determine diluted net income per common share includes the shares used in the
calculation of basic net income per share plus dilutive weighted average
options outstanding.
4. Summary of significant accounting policies
Use of estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenue recognition--Revenue is recognized over the term of educational
programs, as services are rendered and as products are delivered to customers.
Reimbursable expenses are accounted for as a reduction in the applicable
expense category. Deferred revenue primarily consists of amounts received in
advance of programs.
Cash and cash equivalents--The Company considers all short-term, highly liquid
investments that have original maturities of three months or less to be cash
equivalents.
Prepaid expenses and other assets--Prepaid expenses and their current assets
comprise the following:
<TABLE>
<CAPTION>
1997 1998
--------- ----------
<S> <C> <C>
Prepaid program expenses............................ $ 764,840 $1,183,911
Deferred offering costs............................. -- 579,097
Other prepaid expenses.............................. 57,927 206,765
Other current assets................................ 41,468 101,636
--------- ----------
$ 864,235 $2,071,409
========= ==========
</TABLE>
Prepaid program expenses represent expenses incurred for programs to be held,
which are expensed when the programs are held. Deferred offering costs
primarily represent professional fees incurred through December 31, 1998 in
conjunction with the IPO which will be netted against the offering proceeds
upon completion of the IPO.
Property and equipment--Property and equipment are stated at cost and
depreciated using the straight-line method over the useful lives of up to five
years.
Goodwill--Goodwill is the excess of the purchase price over the fair value of
identifiable net assets acquired in a business combination accounted for as a
purchase. Goodwill is amortized on a straight-line basis over its useful life
of 40 years. Goodwill is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. Total
amortization expense and accumulated amortization as of December 31, 1998 was
$9,735.
Long-lived assets--The Company evaluates the carrying values and estimated
useful lives of its long-lived assets, primarily property and equipment and
intangible assets. When factors indicate that such assets should be evaluated
for possible impairment, the Company uses estimates of future cash flows to
determine whether the assets are economically recoverable.
F-8
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
4. Summary of significant accounting policies--continued
Income taxes--Linkage had elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code ("Subchapter S") which provide that
the stockholders are taxed on their proportionate share of the taxable income.
Linkage also recognized income for income tax purposes on a cash basis. Linkage
International is subject to tax at the U.K. statutory rate. High Technologies
is subject to U.S. federal and state taxes.
As a result of Linkage's Subchapter S election, the accompanying consolidated
statements of income do not include an income tax provision for federal and
most state income taxes.
Deferred taxes are recognized based on the estimated future tax effects of
differences between financial statement and tax bases of assets and
liabilities, given the provisions of the enacted laws.
Foreign currency translation--Balance sheet accounts of Linkage International
are translated at year-end exchange rates, and statement of operations accounts
are translated at the average exchange rates in effect during the period.
Resulting translation adjustments are reported as a separate component of
stockholders' equity and are reflected in other comprehensive income.
Net income per common share--Basic net income per common share was calculated
by dividing net income available to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted net income per
common share was calculated by dividing net income available to the common
stockholders by the sum of the weighted average number of common shares
outstanding plus all additional common shares that would have been outstanding
if potentially dilutive common shares had been issued.
The following table reconciles the number of shares utilized in the net income
per common share calculations:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net income available to common stockholders... $1,442,836 $1,929,766 $3,565,224
Basic and diluted net income per common
share........................................ $ 0.23 $ 0.31 $ 0.56
Number of shares:
Common shares--basic........................ 6,143,200 6,300,919 6,327,279
Effect of dilutive securities--stock
options.................................... 5,412 23,230 47,747
---------- ---------- ----------
Common shares--diluted...................... 6,148,612 6,324,149 6,375,026
========== ========== ==========
</TABLE>
Concentration of credit risk--Financial instruments which are potentially
subject to concentration of credit risk consist principally of cash and cash
equivalents and trade accounts receivable. The Company maintains cash deposits
with major financial institutions, which, from time to time, may exceed
federally insured limits. Management periodically assesses the financial
condition of the financial institutions and believes that any possible credit
risk is minimal. The Company performs ongoing credit evaluations of its clients
and does not generally require retainers for services to be rendered. Bad debts
have not been significant in relation to revenues.
F-9
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
4. Summary of significant accounting policies--continued
A summary of the changes in allowance for doubtful accounts receivable is as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year.......................... $146,000 $256,000 $312,000
Provision........................................... 110,000 56,000 190,000
Write-offs.......................................... -- -- (83,000)
-------- -------- --------
Balance, end of year................................ $256,000 $312,000 $419,000
======== ======== ========
</TABLE>
Fair value of financial instruments--Financial instruments held or used by the
Company consist of cash and equivalents, accounts receivable and accounts
payable. Management believes that carrying value approximates fair value for
all financial instruments.
Comprehensive income--The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130 "Reporting Comprehensive Income" in 1998. SFAS No.
130 requires the reporting of comprehensive income that, in the case of the
Company, is the combination of reported net income and other comprehensive
income, which is comprised of foreign currency translation adjustments. SFAS
No. 130 has no impact on the Company's reported net income. Comprehensive
income is included in the consolidated statements of stockholders' equity.
New accounting pronouncements--In June 1998, the Financial Accounting Standards
Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," effective for fiscal years beginning after June 15, 1999.
The standard requires that all companies record derivatives on the balance
sheet as assets or liabilities measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be accounted
for depending on the use of the derivative and whether it qualifies for hedge
accounting. The Company will adopt this statement during fiscal year 2000 and
is currently assessing the impact the statement will have on financial
statements.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides
guidance on accounting for the costs of computer software developed or obtained
for internal use. This pronouncement identifies the characteristics of internal
use software and provides guidance on new cost recognition principles. SOP 98-1
is effective for financial statements for fiscal years beginning after December
15, 1998. The Company currently expenses its costs of computer software
developed or obtained for internal use and expects the adoption will not have a
material impact on its financial statements.
5. Acquisition
In August 1998, the Company acquired High Technologies for $500,000 in cash and
an acquisition liability of $250,000. This amount is due to be paid in cash by
August 2000 or in shares of the Company's common stock within 60 days of the
closing of an IPO, if earlier. The acquisition has been accounted for under the
purchase method of accounting. Goodwill of approximately $645,000 was recorded
and is being amortized over 40 years. Future contingent payments, if any, of up
to $215,000 may be made based on the future earnings of High Technologies and
will be recorded as goodwill when incurred. Pro forma effect of this
acquisition is not material.
F-10
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
6. Related-party transactions
The Company paid a director $54,000, $110,000 and $250,000 for speaker fees and
program development services during 1996, 1997 and 1998, respectively. There
remains approximately $250,000 to be paid under a contract, which expires on
December 31, 1999.
In July 1994, a jury awarded damages (the "Award") to the Company in a breach-
of-contract suit. In February 1995 while the Award was being appealed, the
Company transferred the rights to the Award to an entity owned by the Company's
then sole stockholder (the "Related Entity"). In 1998, the Related Entity
received the Award and paid amounts totalling $1,021,500 to certain employees
of the Company. These payments to employees have been recorded as an expense of
the Company. The Award, net of legal and other related expenses, has been
recorded as other income of the Company in the year ended December 31, 1998.
Because the Award belongs to the Related Entity, the Award, net of such
expenses and the employee payments, has been accounted for by the Company as a
preferential distribution.
7. Property and equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998
-------- ----------
<S> <C> <C>
Furniture and fixtures.............................. $129,580 $ 167,963
Leasehold improvements.............................. -- 44,481
Office equipment.................................... 80,710 101,329
Computer equipment.................................. 438,588 1,128,910
-------- ----------
Total property and equipment........................ 648,878 1,442,683
Accumulated depreciation............................ (181,768) (385,736)
-------- ----------
Net property and equipment.......................... $467,110 $1,056,947
======== ==========
</TABLE>
8. Line of credit
Linkage entered into a $2,000,000 bank line of credit agreement in April 1997,
which was increased to $4,000,000 in June 1998. Borrowings under the line bear
interest at the bank's base rate plus 0.25% and are secured by substantially
all of the Company's assets. The credit agreement contains certain financial
and other restrictive covenants including minimum tangible net worth and
profitability requirements. There were no amounts outstanding under this line
of credit at December 31, 1997 and 1998.
9. Lease commitments
The Company leases its corporate headquarters facility and certain equipment
under noncancelable operating leases expiring at various dates through 2003.
The minimum lease rental commitments under all noncancelable operating leases
as of December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999............................................................. $554,449
2000............................................................. 551,653
2001............................................................. 542,292
2002............................................................. 564,775
2003............................................................. 88,643
</TABLE>
Rent expense under the operating leases was $113,872, $387,108 and $586,056 for
the years ended December 31, 1996, 1997 and 1998, respectively.
F-11
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
10. Industry segment information
Business segments and geographic information
During 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This Statement establishes new
standards for defining and disclosing information of a company's business
segments. SFAS No. 131 requires a company to define its segments along its
internal structure and reporting methodology. The Company engages in business
activities which are of the same nature, which are provided to the same
customer base and which are distributed though similar channels. These business
activities are managed in the aggregate and do not have separate financial
reporting accountability. Therefore, the Company has only identified one
operating segment.
The Company operates in more than one geographic area. The following summarizes
the Company's operations in different geographical areas for the years ended
December 31, 1996, 1997 and 1998, respectively.
<TABLE>
<CAPTION>
United United
States Canada Kingdom Consolidated
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
1996
Revenue.................. $10,089,909 $ -- $ 643,180 $10,733,089
Long-lived assets........ 245,599 -- -- 245,599
1997
Revenue.................. $15,235,486 $ 586,663 $1,727,472 $17,549,621
Long-lived assets........ 467,110 -- -- 467,110
1998
Revenue.................. $20,425,484 $1,093,013 $2,755,621 $24,274,118
Long-lived assets........ 1,690,348 -- -- 1,690,348
</TABLE>
No single customer accounted for 10 percent or more of consolidated revenues.
11. Income taxes
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
State income taxes:
Current...................................... $159,000 $ 95,000 $384,000
Deferred..................................... 34,000 77,000 76,000
-------- -------- --------
Total provision............................ $193,000 $172,000 $460,000
======== ======== ========
</TABLE>
F-12
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
11. Provision for income taxes--continued
The provision for income taxes differs from the amount computed using the
statutory income tax rate of 4.5% due to the following:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1996 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate... $ 73,000 4.5% $ 95,000 4.5% $181,000 4.5%
Federal tax ............ 11,000 0.3
Foreign taxes........... 38,000 2.3 90,000 4.3 310,000 7.6
Change in valuation
allowance.............. 85,000 5.2 -- --
Credits................. -- (3,000) (0.2) 3,000 0.1
Other, net (3,000) (0.2) (10,000) (0.5) (45,000) (1.1)
-------- ---- -------- ---- -------- ----
Total............... $193,000 11.8% $172,000 8.1% $460,000 11.4%
======== ==== ======== ==== ======== ====
</TABLE>
Deferred state taxes are recorded based on the deferral of income subject to
state income taxes, as a result of the Company's election to recognize income
for income tax purposes on a cash basis.
12. Stockholders' equity
1995 Stock option plan--The Company adopted its 1995 Stock Option Plan (the
"1995 plan") in May 1995. Under the terms of the 1995 plan, employees,
consultants, directors and others are eligible to receive options to purchase
shares of common stock of the Company. A total of 3,850,000 shares may be
issued upon exercise of options granted under the 1995 plan. Options granted
typically expire from two to ten years from the date of grant and either vest
immediately or over periods of up to five years. Following the IPO no
additional options under the 1995 plan will be granted.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which sets forth accounting and disclosure requirements for
stock option and other stock-based compensation plans. The Statement
encourages, but does not require, companies to record stock-based compensation
expense using a fair-value method, rather than the intrinsic-value method
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." The Company has adopted only the disclosure
requirements of SFAS No. 123 and has elected to continue to record stock-based
compensation expense using the intrinsic-value approach prescribed by APB No.
25.
In accordance with APB No. 25, the Company has recorded compensation expense
for shares granted at the fair value of those shares at the date of the stock
grant and for the difference, if any, between the exercise price of stock
options and the fair value of the stock at the date of option grant over the
option vesting period, if any, as stock-based compensation in the accompanying
consolidated statements of operations. Stock-based compensation for stock
option grants totalled $4,066, $61,512 and $23,657 in the years ended December
31, 1996, 1997 and 1998, respectively.
The Company has computed the value of all compensatory options granted during
1996, 1997 and 1998 as prescribed by SFAS No. 123, using the Black-Scholes
option pricing model for pro forma disclosure purposes. There were no options
granted prior to January 1, 1996.
F-13
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
12. Stockholders' equity--continued
The following assumptions were used to value grants issued in 1996, 1997 and
1998:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1997 1998
------- ------------- -------------
<S> <C> <C> <C>
Risk-free interest rate (range)............. 5.92% 5.88% - 6.06% 5.01% - 5.65%
Expected dividend yield..................... 0.0% 0.0% 0.0%
Expected lives.............................. 2 years 2 years 2-3 years
</TABLE>
Options were assumed to be exercised upon vesting for the purposes of this
valuation. The Company's stock did not actively trade during 1996, 1997 and
1998.
Had compensation costs for compensatory options been determined consistent with
SFAS No. 123, the Company's net income and earnings per share information
reflected in the accompanying consolidated statements of income would have been
reduced to the following "as adjusted" amounts:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net income available to common stockholders:
As reported................................. $1,442,836 $1,929,766 $3,565,224
As adjusted................................. 1,442,566 1,927,543 3,540,039
Diluted net income per common share:
As reported................................. $ 0.23 $ 0.31 $ 0.56
As adjusted................................. 0.23 0.31 0.56
</TABLE>
The following summarizes transactions under all stock option arrangements for
the years ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
Weighted
average
grant
Range of Weighted date
exercise average fair
Shares price exercise price value
--------- ----------- -------------- --------
<S> <C> <C> <C> <C>
Outstanding as of January 1,
1996.......................... -- $ -- $ --
Granted...................... 5,600 0.44 0.44 $0.06
--------- ----------- --------
Outstanding and exercisable as
of December 31, 1996.......... 5,600 0.44 0.44
Granted...................... 24,640 0.75-0.87 -- $2.50
Exercised.................... (5,600) 0.75 0.75
--------- ----------- --------
Outstanding and exercisable as
of December 31, 1997.......... 24,640 0.44-0.87 0.75
Granted...................... 52,080 1.10-4.46 4.36 $3.86
Exercised.................... (8,960) 0.44-0.87 --
Cancelled.................... (1,680) 0.87 0.87
--------- ----------- --------
Outstanding as of December 31,
1998.......................... 66,080 $0.75-$4.46 $ 3.61
========= =========== ========
Available for future grant as
of December 31, 1998.......... 2,719,360
=========
</TABLE>
F-14
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
12. Stockholders' equity--continued
The following table summarizes information about all stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------- ---------------------------
Range of December 31, Contractual Exercise December 31, Average
Exercise Prices 1998 Life Price 1998 Exercise Price
----------------- ------------ ----------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$0.75........... 5,600 0.08 $0.75 5,600 $ 0.75
0.87............ 8,400 0.67 0.87 8,400 0.87
1.10............ 1,680 2.00 1.10 1,680 1.10
4.46............ 50,400 2.43 4.46 -- --
------- ------ ----- ------- -------
$0.75 to $4.46.... 66,080 1.99 $3.61 15,680 $ 0.85
======= ====== ===== ======= =======
</TABLE>
1999 Stock Incentive Plan--In March 1999, the Board of Directors adopted and
the stockholders approved the 1999 Stock Incentive Plan (the "1999 plan") which
became effective immediately, replacing the 1995 plan. A total of 1,500,000
shares of common stock may be issued upon exercise of options granted or awards
made under the 1999 plan. Under the terms of the 1999 plan, the Company is
authorized to make awards of restricted stock and to grant non-statutory
options and other stock-based awards to employees of and officers, directors,
consultants and advisors to the Company to purchase shares of common stock of
the Company. The vesting period for options granted will be at the discretion
of the Board of Directors at the date of grant. Pursuant to the 1999 plan, the
maximum number of shares to which an award may be granted to any participant
may not exceed 750,000 shares per calendar year. No awards or grants have been
made under the 1999 plan.
1999 Director Stock Option Plan--In March 1999, the Board of Directors adopted
and the stockholders approved the 1999 Director Stock Option Plan (the
"director plan") which became effective immediately. Under the terms of the
director plan, directors of the Company who are not employees of the Company
are eligible to receive nonstatutory options to purchase shares of the
Company's common stock. Each non-employee director continuing as a director
following the IPO will receive an option to purchase 8,000 shares of the
Company's common stock on the effective date of the IPO at a price per share
equivalent to the initial public offering price and an option to purchase 4,000
shares of the Company's common stock on the date of each annual meeting of
stockholders commencing with the 2000 Annual Meeting of Stockholders at an
exercise price per share equal to the closing price of the Company's common
stock on the date of the grant. In addition, individuals who become directors
after the IPO and are not employees of the Company's will receive an option to
purchase 8,000 shares of the Company's common stock on the date of his or her
initial election to the Company's Board of Directors and an option to purchase
4,000 shares of the Company's common stock on the date of each annual meeting
of stockholders after his or her election. A total of 150,000 shares of common
stock may be issued upon exercise of options granted under the director plan.
All options granted under the director plan vest one year from the date of
grant so long as the optionee remains a director of the Company. No grants have
been made under the 1999 director plan.
1999 Employee Stock Purchase Plan--In March 1999, the Board of Directors
adopted and the stockholders approved the 1999 Employee Stock Purchase Plan
(the "purchase plan") which will become effective on the first day that the
Company's shares are offered publicly. The purchase plan authorizes the
issuance of up to a total of 250,000 shares of common stock to participating
employees. Under the terms of the Purchase Plan, the purchase price is an
amount equal to 85% of the average market price per share of the Company's
common stock on either the first day or the last day of the offering period,
whichever is lower. No shares have been issued under the purchase plan.
F-15
<PAGE>
LINKAGE SOLUTIONS, INC.
Notes to consolidated financial statements--(Continued)
13. Employee Benefit Plan
In January 1994, the Company adopted an employee savings and retirement plan
qualified under Section 401(k) of the Internal Revenue Code and covering all of
the employees. Pursuant to the 401(k) plan, employees may elect to reduce their
current compensation by up to the statutorily prescribed annual limit and have
the amount of such reduction contributed to the 401(k) plan. The Company may
make matching or additional contributions to the 401(k) plan in amounts to be
determined annually by the Company's Board of Directors. For the years ending
December 31, 1996, 1997 and 1998, the contributions were approximately $91,000,
$131,000 and $132,000, respectively.
14. Litigation
From time to time, the Company is involved in routine litigation that arises in
the ordinary course of its business. There are no pending material legal
proceedings to which the Company is a party or to which the property of the
Company is subject.
* * * * * *
F-16
<PAGE>
Shares
[LINKAGE SOLUTIONS, INC. LOGO APPEARS HERE]
Common Stock
----------------
PROSPECTUS
----------------
Until , 1999, all dealers that effect transactions in these securities,
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.
U.S. Bancorp Piper Jaffray
BancBoston Robertson Stephens
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses, all of which will be borne
by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 11,118
NASD filing fee.................................................. 4,500
Nasdaq National Market listing fee............................... 75,625
Blue Sky fees and expenses....................................... 5,000
Transfer Agent and Registrar fees................................ 5,000
Accounting fees and expenses..................................... 600,000
Legal fees and expenses.......................................... 400,000
Printing and mailing expenses.................................... 100,000
Miscellaneous.................................................... 48,757
----------
Total $1,250,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Article EIGHTH of the Registrant's Certificate of Incorporation provides that
no director of the Registrant shall be personally liable for any monetary
damages for any breach of fiduciary duty as a director, except to the extent
that the Delaware General Corporation Law prohibits the elimination or
limitation of liability of directors for breach of fiduciary duty.
Article NINTH of the Registrant's Certificate of Incorporation provides that a
director or officer of the Registrant (a) shall be indemnified by the
Registrant against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement incurred in connection with any litigation or
other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.
II-1
<PAGE>
Indemnification is required to be made unless the Registrant determines that
the applicable standard of conduct required for indemnification has not been
met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article NINTH of the Registrant's Certificate of Incorporation further provides
that the indemnification provided therein is not exclusive, and provides that
in the event that the Delaware General Corporation Law is amended to expand the
indemnification permitted to directors or officers the Registrant must
indemnify those persons to the fullest extent permitted by such law as so
amended.
Section 145 of the Delaware General Corporation Law provides that a corporation
has the power to indemnify a director, officer, employee or agent of the
corporation and certain other persons serving at the request of the corporation
in related capacities against amounts paid and expenses incurred in connection
with an action or proceeding to which he is or is threatened to be made a party
by reason of such position, if such person shall have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the corporation unless and only
to the extent that the adjudicating court determines that such indemnification
is proper under the circumstances.
Under Section 6 of the Underwriting Agreement, the underwriters are obligated,
under certain circumstances, to indemnify directors and officers of the
Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed
as Exhibit 1 hereto.
Item 15. Recent Sales of Unregistered Securities
Set forth in chronological order below is information regarding shares of
common stock issued and options granted by the Registrant since its formation
in March 1999. Further included is the consideration, if any, received by the
Registrant for such shares and options and information relating to the section
of the Securities Act of 1933, or rule of the Securities and Exchange
Commission under which exemption from registration was claimed.
In connection with its incorporation on March 9, 1999, the Registrant issued
100 shares of common stock to Linkage, Inc., a Massachusetts corporation
("Linkage Massachusetts"), for an aggregate purchase price of $1.00.
Prior to the consummation of this offering, each issued and outstanding share
of common stock of Linkage Massachusetts will be exchanged for 560 shares of
common stock of the Registrant, or an aggregate of 6,334,160 shares of common
stock, and (ii) each option to purchase a share of common stock of Linkage
Massachusetts will become an option to purchase 560 shares of common stock of
the Registrant, or options to purchase an aggregate of 133,280 shares of common
stock.
On the effective date of this offering, each non-employee director continuing
as a director following the offering will receive an option under the
Registrant's 1999 Director Stock Option Plan to purchase
II-2
<PAGE>
8,000 shares of common stock at a price per share equivalent to the initial
public offering price.
Pursuant to the Stock Purchase Agreement by and among Linkage Massachusetts,
High, Maley & Milhorn, Inc. and the stockholders of High, Maley & Milhorn,
Inc., as partial consideration for the shares of High, Maley & Milhorn, Inc.,
the Registrant is obligated to issue to such stockholders, on or before the
date that is 60 days after the closing of this offering, a number of shares of
common stock that is equal to $250,000 divided by the initial public offering
price.
The securities issued or to be issued in the foregoing transactions were or
will be offered and sold in reliance upon exemptions from Securities Act
registration set forth in Section 4(2) of the Securities Act, or any
regulations promulgated thereunder, relating to sales by an issuer not
involving any public offering. No underwriters were or will be involved in the
foregoing sales of securities.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1 Form of Purchase Agreement.
2.1 Agreement and Plan of Merger by and among the Registrant, Linkage,
Inc. and Linkage Transitory Corp.
2.2 Stock Purchase Agreement, dated as of August 7, 1998, by and among
Linkage, Inc., High, Maley & Milhorn, Inc. and the stockholders of
High, Maley & Milhorn, Inc.
3.1 Certificate of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
4* Specimen certificate for shares of Common Stock, $.01 par value per
share, of the Registrant.
5* Opinion of Hale and Dorr LLP.
10.1 1995 Stock Option Plan, including form of option agreement.
10.2 1999 Stock Incentive Plan, including forms of stock option agreement
for incentive and nonstatutory stock options.
10.3 1999 Director Stock Option Plan, including form of stock option
agreement.
10.4 1999 Employee Stock Purchase Plan.
10.5 Lease between the Registrant and The Trustees of Lexington Development
Company Trust, dated May 21, 1996.
10.6* Loan and Security Agreement between the Registrant and BankBoston,
N.A., and Master Note, each dated June 30, 1998.
10.7 Amended and Restated Services Agreement, dated as of March 5, 1999, by
and between the Registrant and Warren Bennis.
10.8 Form of Tax Indemnification Agreement to be entered into by Linkage,
Inc. and each of its existing stockholders.
11 Computation of earnings per common share.
21 Subsidiaries of the Registrant.
23.1* Independent Auditors' Consent.
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5).
23.3 Consent of Wallace A. Cataldo.
24 Power of Attorney (included on page II-5).
27 Financial Data Schedule.
</TABLE>
- -------------------------------
* To be filed by amendment.
II-3
<PAGE>
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set forth
therein is not applicable or is shown in the financial statements or the notes
thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions contained in the Certificate of Incorporation of the
Registrant and the laws of the State of Delaware, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in 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, 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>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Lexington,
Massachusetts, on this 12th day of March 1999.
LINKAGE SOLUTIONS, INC.
By: /s/ Philip J. Harkins
----------------------------------
Philip J. Harkins
President, Chief Executive
Officer
and Chairman of the Board
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Linkage Solutions, Inc., hereby
severally constitute and appoint Philip J. Harkins, Larry R. Carr, Russell
Sullivan and Hal J. Leibowitz, and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement on
Form S-1 filed herewith and any and all pre-effective and post-effective
amendments to said Registration Statement, and any subsequent Registration
Statement for the same offering which may be filed under Rule 462(b), and
generally to do all such things in our names and on our behalf in our
capacities as officers and directors to enable Linkage Solutions, Inc. to
comply with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any
of them, to said Registration Statement and any and all amendments thereto or
to any subsequent Registration Statement for the same offering which may be
filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Philip J. Harkins President, Chief Executive March 12, 1999
______________________________________ Officer and Chairman of
Philip J. Harkins the Board (Principal
Executive Officer)
/s/ Peter McKenzie Chief Financial Officer March 12, 1999
______________________________________ (Principal Financial and
Peter McKenzie Accounting Officer)
/s/ Larry R. Carr Director March 12, 1999
______________________________________
Larry R. Carr
/s/ Warren Bennis Director March 12, 1999
______________________________________
Warren Bennis
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1 Form of Purchase Agreement.
2.1 Agreement and Plan of Merger by and among the Registrant, Linkage,
Inc. and Linkage Transitory Corp.
2.2 Stock Purchase Agreement, dated as of August 7, 1998, by and among
Linkage, Inc., High, Maley & Milhorn, Inc. and the stockholders of
High, Maley & Milhorn, Inc.
3.1 Certificate of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
4* Specimen certificate for shares of Common Stock, $.01 par value per
share, of the Registrant.
5* Opinion of Hale and Dorr LLP.
10.1 1995 Stock Option Plan, including form of option agreement.
10.2 1999 Stock Incentive Plan, including forms of stock option agreement
for incentive and nonstatutory stock options.
10.3 1999 Director Stock Option Plan, including form of stock option
agreement.
10.4 1999 Employee Stock Purchase Plan.
10.5 Lease between the Registrant and The Trustees of Lexington Development
Company Trust, dated May 21, 1996.
10.6* Loan and Security Agreement between the Registrant and BankBoston,
N.A., and Master Note, each dated June 30, 1998.
10.7 Amended and Restated Services Agreement, dated as of March 5, 1999, by
and between the Registrant and Warren Bennis.
10.8 Form of Tax Indemnification Agreement to be entered into by Linkage,
Inc. and each of its existing stockholders.
11 Computation of earnings per common share.
21 Subsidiaries of the Registrant.
23.1* Independent Auditors' Consent.
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5).
23.3 Consent of Wallace A. Cataldo.
24 Power of Attorney (included on page II-5).
27 Financial Data Schedule.
</TABLE>
- -------------------------------
* To be filed by amendment.
<PAGE>
EXHIBIT 1
Draft of March 12, 1999
-----------------------
_____SHARES/1/
LINKAGE SOLUTIONS, INC.
COMMON STOCK
PURCHASE AGREEMENT
------------------
_____________________, 1999
U.S. BANCORP PIPER JAFFRAY INC.
BANCBOSTON ROBERTSON STEPHENS INC.
As Representatives of the several
Underwriters named in Schedule II hereto
c/o U.S. Bancorp Piper Jaffray Inc.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
Gentlemen:
Linkage Solutions, Inc., a Delaware corporation (the "Company"), and the
stockholders of the Company listed in Schedule I hereto (the "Selling
Stockholders") severally propose to sell to the several Underwriters named in
Schedule II hereto (the "Underwriters") an aggregate of __________ shares (the
"Firm Shares") of Common Stock, $.01 par value per share (the "Common Stock"),
of the Company. The Firm Shares consist of ________ authorized but unissued
shares of Common Stock to be issued and sold by the Company and ______
outstanding shares of Common Stock to be sold by the Selling Stockholders. The
Company has also granted to the several Underwriters an option to purchase up to
_______ additional shares of Common Stock on the terms and for the purposes set
forth in Section 3 hereof (the "Option Shares"). The Firm Shares and any Option
Shares purchased pursuant to this Purchase Agreement are herein collectively
called the "Securities."
The Company and the Selling Stockholders hereby confirm their agreement
with respect to the sale of the Securities to the several Underwriters, for whom
you are acting as Representatives (the "Representatives") as follows:
__________________
/1/ Plus an option to purchase up to _______ additional shares to cover
over-allotments.
<PAGE>
1. Registration Statement and Prospectus. A registration statement on
-------------------------------------
Form S-1 (File No. 333-___________ ) with respect to the Securities, including a
preliminary form of prospectus, has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") promulgated thereunder and has been filed
with the Commission; one or more amendments to such registration statement have
also been so prepared and have been, or will be, so filed; and, if the Company
has elected to rely upon Rule 462(b) of the Rules and Regulations to increase
the size of the offering registered under the Act, the Company will prepare and
file with the Commission a registration statement with respect to such increase
pursuant to Rule 462(b). Copies of such registration statement(s) and
amendments and each related preliminary prospectus have been delivered to you.
If the Company has elected not to rely upon Rule 430A of the Rules and
Regulations, the Company has prepared and will promptly file an amendment to the
registration statement and an amended prospectus (including a term sheet meeting
the requirements of Rule 434 of the Rules and Regulations). If the Company has
elected to rely upon Rule 430A of the Rules and Regulations, it will prepare and
file a prospectus (or a term sheet meeting the requirements of Rule 434)
pursuant to Rule 424(b) that discloses the information previously omitted from
the prospectus in reliance upon Rule 430A. Such registration statement as
amended at the time it is or was declared effective by the Commission, and, in
the event of any amendment thereto after the effective date and prior to the
First Closing Date (as defined below), such registration statement as so amended
(but only from and after the effectiveness of such amendment), including a
registration statement (if any) filed pursuant to Rule 462(b) of the Rules and
Regulations increasing the size of the offering registered under the Act and
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rules 430A(b) or 434(d) of the Rules and
Regulations, is hereinafter called the "Registration Statement." The prospectus
included in the Registration Statement at the time it is or was declared
effective by the Commission is hereinafter called the "Prospectus," except that
if any prospectus (including any term sheet meeting the requirements of Rule 434
of the Rules and Regulations provided by the Company for use with a prospectus
subject to completion within the meaning of Rule 434 in order to meet the
requirements of Section 10(a) of the Rules and Regulations) filed by the Company
with the Commission pursuant to Rule 424(b) (and Rule 434, if applicable) of the
Rules and Regulations or any other such prospectus provided to the Underwriters
by the Company for use in connection with the offering of the Securities
(whether or not required to be filed by the Company with the Commission pursuant
to Rule 424(b) of the Rules and Regulations) differs from the prospectus on file
at the time the Registration Statement is or was declared effective by the
Commission, the term "Prospectus" shall refer to such differing prospectus
(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations) from and after the earlier of the time such prospectus is filed
with the Commission or transmitted to the Commission for filing pursuant to such
Rule 424(b) (and Rule 434, if applicable) and the time it is first provided to
the Underwriters by the Company for such use. The term "Preliminary Prospectus"
as used herein means any preliminary prospectus included in the Registration
Statement prior to the time it
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<PAGE>
becomes or became effective under the Act and any prospectus subject to
completion as described in Rule 430A or 434 of the Rules and Regulations.
2. Representations and Warranties of the Company and the Selling
-------------------------------------------------------------
Stockholders.
- ------------
(a) The Company represents and warrants to, and agrees with, the
several Underwriters as follows:
(i) No order preventing or suspending the use of any
Preliminary Prospectus issued by the Commission is in effect.
(ii) As of the time the Registration Statement (or any post-
effective amendment thereto, including a registration statement (if any)
filed pursuant to Rule 462(b) of the Rules and Regulations increasing the
size of the offering registered under the Act) is or was declared effective
by the Commission, upon the filing or first delivery to the Underwriters of
the Prospectus (or any supplement to the Prospectus (including any term
sheet meeting the requirements of Rule 434 of the Rules and Regulations))
and at the First Closing Date and Second Closing Date (as hereinafter
defined), (A) the Registration Statement and Prospectus (in each case, as
amended and/or supplemented) conformed or will conform in all material
respects to the requirements of the Act and the Rules and Regulations, (B)
the Registration Statement (as amended) did not or will not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and (C) the Prospectus (as amended or supplemented) did not
or will not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are or were
made, not misleading; except that the foregoing shall not apply to
statements in or omissions from any such document in reliance upon, and in
conformity with, written information furnished to the Company by you, or by
any Underwriter through you, specifically for use in the preparation
thereof. If the Registration Statement has been declared effective by the
Commission, no stop order suspending the effectiveness of the Registration
Statement is in effect, and, to the Company's knowledge, no proceeding for
that purpose has been initiated or threatened by the Commission.
(iii) The consolidated financial statements of the Company,
together with the notes thereto, set forth in the Registration Statement
and Prospectus comply in all material respects with the requirements of the
Act and fairly present, in all material respects, the consolidated
financial condition of the Company and its subsidiaries as of the dates
indicated and the results of their operations and changes in cash flows for
the periods therein specified in conformity with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise stated therein); and the supporting schedules included
in the Registration Statement present fairly the information required to be
stated therein. No other financial statements or schedules are
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required to be included in the Registration Statement or Prospectus.
Deloitte & Touche LLP, which has expressed its opinion with respect to the
financial statements and schedules filed as a part of the Registration
Statement and included in the Registration Statement and the Prospectus,
are independent public accountants as required by the Act and the Rules and
Regulations.
(iv) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation. Each of the Company and its
subsidiaries has corporate power and authority to own its properties and
conduct its business as described in the Registration Statement and the
Prospectus, and is duly qualified to do business as a foreign corporation
in good standing in each jurisdiction in which it owns or leases real
property or in which the conduct of its business makes such qualification
necessary, except, in either such case, where the failure to so qualify
would not result in a material adverse change in the business, financial
condition, property or consolidated results of operations of the Company
and its subsidiaries, taken as a whole (a "Material Adverse Change").
(v) Except as otherwise disclosed in or contemplated by the
Registration Statement or Prospectus (as it may be amended or
supplemented), subsequent to the respective dates as of which information
is given in the Prospectus, (A) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, direct or contingent, not in the ordinary course of business,
or entered into any material transactions not in the ordinary course of
business; (B) there has been no dividend or distribution of any kind
declared or paid with respect to the Company's capital stock; and (C) there
has not been any change in the capital stock (other than a change in the
number of outstanding shares of Common Stock due to the issuance of shares
upon the exercise of outstanding options or warrants), or any material
change in the short-term or long-term debt, or any issuance of options,
warrants, convertible securities or other rights to purchase the capital
stock, of the Company or any of its subsidiaries, or any Material Adverse
Change, or any development that could reasonably be expected to result in a
prospective Material Adverse Change.
(vi) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company or any of its subsidiaries is a party
before or by any court or governmental agency, authority or body, or any
arbitrator, which, if decided adversely, could reasonably be expected to
result in a Material Adverse Change.
(vii) There are no contracts or documents of the Company or any
of its subsidiaries that are required to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations that have
not been so filed.
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<PAGE>
(viii) This Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid, legal and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except as rights to indemnity and contribution hereunder
may be limited by federal or state securities laws and matters of public
policy and except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions herein contemplated
will not result in a breach or violation of any of the terms and provisions
of, or constitute a default under, any statute, any agreement or instrument
to which the Company is a party or by which it is bound or to which any of
its property is subject, except for such breaches, violations, or defaults
as would not, individually or in the aggregate, result in a Material
Adverse Change, the Company's charter or by-laws, or any order, rule,
regulation or decree of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; no consent,
approval, authorization or order of, or filing with, any court or
governmental agency or body is required for the execution, delivery and
performance by the Company of this Agreement or for the consummation by the
Company of the transactions contemplated hereby, including the issuance or
sale of the Securities by the Company, except such as may be required under
the Act or state securities or blue sky laws or by the National Association
of Securities Dealers, Inc. (the "NASD"); and the Company has full power
and authority to enter into this Agreement and to authorize, issue and sell
the Securities to be sold by it as contemplated by this Agreement.
(ix) All of the issued and outstanding shares of capital stock
of the Company, including the outstanding shares of Common Stock, are duly
authorized and validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not
issued in violation of any preemptive rights or other rights to subscribe
for or purchase securities; the Securities which may be sold hereunder by
the Company have been duly authorized and, when issued, delivered and paid
for in accordance with the terms hereof, will have been validly issued and
will be fully paid and nonassessable; and the capital stock of the Company,
including the Common Stock, conforms in all material respects to the
description thereof in the Registration Statement and the Prospectus.
Except as otherwise disclosed in or contemplated by the Registration
Statement or Prospectus, there are no preemptive rights or other rights to
subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the Company's charter,
by-laws or any agreement or other instrument to which the Company is a
party or by which the Company is bound, which, in any such case, will
survive the First Closing Date. Neither the filing of the Registration
Statement nor the offering or sale of the Securities as contemplated by
this Agreement gives rise to any rights for or relating to the registration
of any shares of Common Stock or other securities of the Company. All of
the issued and outstanding shares of capital stock of each of the Company's
subsidiaries have been duly and validly authorized and
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<PAGE>
issued and are fully paid and nonassessable, and, except as otherwise
described in the Registration Statement and the Prospectus and except for
any directors' qualifying shares, the Company owns of record and
beneficially, free and clear of any security interests, claims, liens,
proxies, equities or other encumbrances, all of the issued and outstanding
shares of such stock. Except as disclosed in or contemplated by the
Registration Statement or Prospectus, there are no options, warrants,
agreements, contracts or other rights in existence to purchase or acquire
from the Company or any subsidiary of the Company any shares of the capital
stock of the Company or any subsidiary of the Company. The Company has an
authorized and outstanding capitalization as set forth in the Registration
Statement and the Prospectus (other than for subsequent issuances pursuant
to employee stock plans described in the Prospectus or upon exercise of
outstanding options described in the Prospectus).
(x) The Company and each of its subsidiaries holds, and is
operating in compliance with, all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates and orders of any
governmental or self-regulatory body required for the conduct of its
business and all such franchises, grants, authorizations, licenses,
permits, easements, consents, certifications and orders are valid and in
full force and effect, except where the failure to hold, or operate in
compliance with, any such franchises, grants, authorizations, licenses,
permits, easements, consents, certificates or orders or for any of such
items to be valid and in full force and effect would not cause a Material
Adverse Change; and the Company and each of its subsidiaries is in
compliance with all applicable federal, state, local and foreign laws,
regulations, orders and decrees, except where the failure to be in such
compliance would not cause a Material Adverse Change.
(xi) The Company and its subsidiaries own no real property. The
Company and its subsidiaries have good and valid title to all property
described in the Registration Statement and the Prospectus as being owned
by them, in each case free and clear of all liens, claims, security
interests or other encumbrances except such as are disclosed in the
Registration Statement or Prospectus or do not materially and adversely
affect the value of such property or do not materially interfere with the
use made or proposed to be made of such property by the Company and its
subsidiaries; the property held under lease by the Company and its
subsidiaries is held by them under valid and enforceable leases with only
such exceptions with respect to any particular lease as do not interfere in
any material respect with the conduct of the business of the Company or its
subsidiaries; except as disclosed in the Registration Statement or
Prospectus, the Company and each of its subsidiaries owns or possesses
sufficient patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations, copyrights,
licenses, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary for the conduct of the
business of the Company and its subsidiaries as currently conducted; except
as disclosed in the Registration Statement or Prospectus, neither the
Company nor any of its subsidiaries has
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<PAGE>
received any written notice of infringement or conflict with asserted
Intellectual Property Rights of others, which infringement or conflict, if
the subject of an unfavorable decision, would result in a Material Adverse
Change.
(xii) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in breach of or otherwise
in material default in the performance of any material obligation,
agreement or condition contained in any bond, debenture, note, indenture,
loan agreement or any other material contract, lease or other instrument to
which it is subject or by which any of them may be bound, or to which any
of the material property or assets of the Company or any of its
subsidiaries is subject.
(xiii) The Company and its subsidiaries have filed all federal,
state, local and foreign income and franchise tax returns required to be
filed or have requested extensions thereof, except for those returns as to
which the failure to file would not, individually or in the aggregate, give
rise to a Material Adverse Change, and are not in default in the payment of
any taxes which were payable pursuant to said returns or any assessments
with respect thereto, other than any which the Company or any of its
subsidiaries is contesting in good faith.
(xiv) The Company has not distributed and will not distribute
any prospectus or other offering material in connection with the offering
and sale of the Securities other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to be distributed by the
Company.
(xv) The Common Stock has been approved for listing on the
Nasdaq National Market, subject only to official notice of issuance, and,
on the date the Registration Statement became or becomes effective, the
Company's Registration Statement on Form 8-A or other applicable form under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
became or will become effective.
(xvi) Other than the subsidiaries of the Company listed in
Exhibit 21 to the Registration Statement, the Company does not own or
control, directly or indirectly, any corporation, partnership, association,
trust or other entity.
(xvii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions
are executed in accordance with management's general or specific
authorization; (B)transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (C) access
to assets is permitted only in accordance with management's general or
specific authorization; and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
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<PAGE>
(xviii) Other than as contemplated by this Agreement, the
Company has not incurred any liability for any finder's or broker's fee or
agent's commission in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(xix) The Company is not, and upon the issuance and sale of the
Securities to be sold by the Company as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(b) Each Selling Stockholder, severally and not jointly, represents
and warrants to, and agrees with, the several Underwriters as follows:
(i) Such Selling Stockholder has, and on the First Closing
Date will have, valid and marketable title to the Securities to be sold by
such Selling Stockholder, free and clear of all security interests, claims,
liens, restrictions on transferability, legends, proxies, equities or other
encumbrances (except for restrictions on transfer contained in a
stockholders agreement between such Stockholder and the Company, which
restrictions shall not survive the First Closing Date, and restrictions and
legends imposed under applicable securities laws); and upon the
Underwriters obtaining control of the Securities to be sold by such Selling
Stockholder, and assuming the Underwriters purchased such Securities for
value and without notice of any adverse claim to such Securities within the
meaning of Section 8-102 of the Uniform Commercial Code as in effect in The
Commonwealth of Massachusetts, the several Underwriters will have acquired
all rights of such Selling Stockholders in such Securities free of any
adverse claim, any lien in favor of the Company and any restrictions on
transfer imposed by the Company. Such Selling Stockholder is selling the
Securities to be sold by such Selling Stockholder for such Selling
Stockholder's own account and is not selling such Securities, directly or
indirectly, for the benefit of the Company, and no part of the proceeds of
such sale received by such Selling Stockholder will inure, either directly
or indirectly, to the benefit of the Company other than as described in the
Registration Statement and the Prospectus.
(ii) Such Selling Stockholder has duly executed and delivered
a Custody Agreement ("Custody Agreement"), which Custody Agreement is a
valid and binding obligation of such Selling Stockholder, to Linkage
Solutions, Inc., as Custodian (the "Custodian"); pursuant to the Custody
Agreement the Selling Stockholder has placed in custody with the Custodian,
for delivery under this Agreement, the certificates representing the
Securities to be sold by such Selling Stockholder; such certificates
represent validly issued, fully paid and nonassessable shares of Common
Stock; and such certificates were duly and properly endorsed in blank for
transfer, or were accompanied by all documents duly and properly executed
that are necessary to validate the transfer of title thereto, to the
Underwriters.
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<PAGE>
(iii) Such Selling Stockholder has the power and authority to
enter into this Agreement and to sell, transfer and deliver the Securities
to be sold by such Selling Stockholder hereunder; and such Selling
Stockholder has duly authorized, executed and delivered to Philip J.
Harkins and Larry R. Carr, as attorneys-in-fact (the "Attorneys-in-Fact"),
an irrevocable power of attorney (a "Power of Attorney") authorizing and
directing the Attorneys-in-Fact, or either of them, to effect the sale and
delivery of the Securities being sold by such Selling Stockholder, to enter
into this Agreement and to take action hereunder.
(iv) This Agreement, the Custody Agreement and the Power of
Attorney have each been duly executed and delivered by or on behalf of such
Selling Stockholder and each constitutes a valid and binding agreement of
such Selling Stockholder, enforceable against such Selling Stockholder in
accordance with its terms, except as rights to indemnity or contribution
hereunder or thereunder may be limited by federal or state securities laws
or matters of public policy and except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or laws affecting the
rights of creditors generally and subject to general principles of equity.
The execution and delivery by or on behalf of such Selling Stockholder of
this Agreement, the Custody Agreement and the Power of Attorney and the
performance by or on behalf of such Selling Stockholder of the terms hereof
and thereof and the consummation by or on behalf of such Selling
Stockholder of the transactions herein and therein contemplated will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound, or any law, regulation, order or decree applicable to such Selling
Stockholder; no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
execution, delivery and performance by or on behalf of such Selling
Stockholder of this Agreement, the Custody Agreement and the Power of
Attorney or for the consummation by or on behalf of such Selling
Stockholder of the transactions contemplated hereby and thereby, including
the sale of the Securities being sold by such Selling Stockholder, except
such as have been made and as may be required under the Act or state
securities laws or blue sky laws or by the NASD.
(v) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Securities other than any Preliminary Prospectus
or the Prospectus or other materials permitted by the Act to be distributed
by such Selling Stockholder.
(vi) All information about such Selling Stockholder furnished by
or on behalf of such Selling Stockholder for use in the Registration
Statement and the Prospectus is, and on the First Closing Date will be,
true, correct and complete in all material respects and does not, and on
the First Closing Date will not, contain any untrue statement
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of a material fact or omit to state any material fact necessary to make
such information not misleading. Such Selling Stockholder confirms as
accurate the number of shares of Common Stock set forth opposite such
Selling Stockholder's name in the Prospectus under the caption "Principal
and Selling Stockholders" (both prior to and after giving effect to the
sale of the Securities).
(vii) To the knowledge of such Selling Stockholder, the
representations and warranties of the Company contained in paragraph (a) of
this Section 2 are true and correct in all material respects. Any claim for
damages for a breach of the representations and warranties of such Selling
Stockholder set forth in this Section 2(b)(vii) shall be limited to the
amount set forth in the last sentence of Section 6(a) hereof. In no event
shall such Selling Stockholder have any liability for damages under this
Section 2(b)(vii) unless the closing on the First Closing Date shall have
occurred.
(c) Any certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters on the First Closing Date or
the Second Closing Date shall be deemed a representation and warranty by the
Company to each Underwriter as to the matters covered thereby; any certificate
signed by or on behalf of any Selling Stockholder as such and delivered to you
or to counsel for the Underwriters on the First Closing Date shall be deemed a
representation and warranty by such Selling Stockholder to each Underwriter as
to the matters covered thereby.
3. Purchase, Sale and Delivery of Securities.
-----------------------------------------
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to issue and sell _________ Firm Shares, and each Selling
Stockholder agrees, severally and not jointly, to sell the number of Firm Shares
set forth opposite the name of such Selling Stockholder in Schedule I hereto, to
the several Underwriters, and each Underwriter agrees, severally and not
jointly, to purchase from the Company and the Selling Stockholders the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule II
hereto. The purchase price for each Firm Share shall be $____ per share. The
obligation of each Underwriter to each of the Company and the Selling
Stockholders shall be to purchase from each of the Company and the Selling
Stockholders that number of Firm Shares (to be adjusted by the Representatives
to avoid fractional shares) which represents the same proportion of the number
of Firm Shares to be sold by each of the Company and the Selling Stockholders
pursuant to this Agreement as the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule II hereto represents to the total number of
Firm Shares to be purchased by all Underwriters pursuant to this Agreement. In
making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraph (c) of this Section 3 and in Section 8
hereof, the agreement of each Underwriter is to purchase only the respective
number of Firm Shares specified in Schedule II.
The Firm Shares will be delivered by the Company and the Custodian to
you for the accounts of the several Underwriters against payment of the purchase
price therefor by wire transfer of immediately available funds to bank accounts
designated by the Company and the Custodian, as appropriate, at the offices of
U.S. Bancorp Piper Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota, or such other location as may be mutually
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acceptable, at 9:00 a.m. Central time on the third (or if the Securities are
priced, as contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30
p.m. Eastern time, the fourth) full business day following the date hereof, or
at such other time and date as you and the Company determine pursuant to Rule
15c6-1(a) under the Exchange Act, such time and date of delivery being herein
referred to as the "First Closing Date." If the Representatives so elect,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the Representatives.
Certificates representing the Firm Shares, in definitive form and in such
denominations and registered in such names as you may request upon at least two
business days' prior notice to the Company and the Custodian, will be made
available for checking and packaging not later than 10:30 a.m., Central time, on
the business day next preceding the First Closing Date at the offices of U.S.
Bancorp Piper Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota, or such other location as may be mutually acceptable.
(b) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the several Underwriters an option to purchase all or
any portion of the Option Shares at the same purchase price as the Firm Shares,
for use solely in covering any over-allotments made by the Underwriters in the
sale and distribution of the Firm Shares. The option granted hereunder may be
exercised at any time (but not more than once) within 30 days after the
effective date of this Agreement upon notice (confirmed in writing) by the
Representatives to the Company setting forth the aggregate number of Option
Shares as to which the several Underwriters are exercising the option, the names
and denominations in which the certificates for the Option Shares are to be
registered and the date and time, as determined by you, when the Option Shares
are to be delivered, such time and date being herein referred to as the "Second
Closing" and "Second Closing Date", respectively; provided, however, that the
Second Closing Date shall not be earlier than the First Closing Date nor earlier
than the third full business day after delivery of such notice of exercise. The
number of Option Shares to be purchased by each Underwriter shall be the same
percentage of the total number of Option Shares to be purchased by the several
Underwriters as the number of Firm Shares to be purchased by such Underwriter is
of the total number of Firm Shares to be purchased by the several Underwriters,
as adjusted by the Representatives in such manner as the Representatives deem
advisable to avoid fractional shares. No Option Shares shall be sold and
delivered unless the Firm Shares previously have been, or simultaneously are,
sold and delivered.
The Option Shares will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the purchase price
therefor by wire transfer of immediately available funds to a bank account
designated by the Company at the offices of U.S. Bancorp Piper Jaffray Inc.,
Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota, or such
other location as may be mutually acceptable at 9:00 a.m., Central time, on the
Second Closing Date. If the Representatives so elect, delivery of the Option
Shares may be made by credit through full fast transfer to the accounts at The
Depository Trust Company designated by the Representatives. Certificates
representing the Option Shares in definitive form and in such
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denominations and registered in such names as you have set forth in your notice
of option exercise, will be made available for checking and packaging not later
than 10:30 a.m., Central time, on the business day next preceding the Second
Closing Date at the office of U.S. Bancorp Piper Jaffray Inc., Piper Jaffray
Tower, 222 South Ninth Street, Minneapolis, Minnesota, or such other location as
may be mutually acceptable.
(c) It is understood that you, individually and not as
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment to the Company or the Selling Stockholders, on behalf of any
Underwriter for the Securities to be purchased by such Underwriter. Any such
payment by you shall not relieve any such Underwriter of any of its obligations
hereunder. Nothing herein contained shall constitute any of the Underwriters an
unincorporated association or partner with the Company or any Selling
Stockholder.
4. Covenants.
---------
(a) The Company covenants and agrees with the several Underwriters as
follows:
(i) If the Registration Statement has not already been declared
effective by the Commission, the Company will use its best efforts to cause
the Registration Statement and any post-effective amendments thereto to
become effective as promptly as possible; the Company will notify you
promptly of the time when the Registration Statement or any post-effective
amendment to the Registration Statement has become effective or any
supplement to the Prospectus (including any term sheet within the meaning
of Rule 434 of the Rules and Regulations) has been filed and of any request
by the Commission for any amendment or supplement to the Registration
Statement or Prospectus or additional information; if the Company has
elected to rely on Rule 430A of the Rules and Regulations, the Company will
prepare and file a Prospectus (or term sheet within the meaning of Rule 434
of the Rules and Regulations) containing the information omitted therefrom
pursuant to Rule 430A of the Rules and Regulations with the Commission
within the time period required by, and otherwise in accordance with the
provisions of, Rules 424(b), 430A and 434, if applicable, of the Rules and
Regulations; if the Company has elected to rely upon Rule 462(b) of the
Rules and Regulations to increase the size of the offering registered under
the Act, the Company will prepare and file a registration statement with
respect to such increase with the Commission within the time period
required by, and otherwise in accordance with the provisions of, Rule
462(b); the Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration
Statement or Prospectus (including any term sheet within the meaning of
Rule 434 of the Rules and Regulations) that, in your opinion, may be
reasonably necessary to make any required changes in the description of the
plan of distribution of the Securities set forth therein; and the Company
will not file any amendment or supplement to the Registration Statement or
Prospectus (including any term sheet within the meaning of Rule 434 of the
Rules and Regulations) to which you
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<PAGE>
shall reasonably object by notice to the Company after having been
furnished a copy a reasonable time prior to the filing.
(ii) The Company will advise you, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceeding for any such purpose; and the Company will
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such a stop order should be issued.
(iii) Within the time during which a prospectus (including any
term sheet within the meaning of Rule 434 of the Rules and Regulations)
relating to the Securities is required to be delivered under the Act, the
Company will comply as far as it is able with all requirements imposed upon
it by the Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Securities as contemplated
by the provisions hereof and the Prospectus. If during such period any
event occurs as a result of which the Prospectus would include an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if during such period it is necessary to
amend the Registration Statement or supplement the Prospectus to comply
with the Act, the Company will promptly notify you and will amend the
Registration Statement or supplement the Prospectus (at the expense of the
Company) so as to correct such statement or omission or effect such
compliance.
(iv) The Company will cooperate with the Representatives and
counsel for the Underwriters in qualifying the Securities for sale under
the securities laws of such jurisdictions as you reasonably designate and
to continue such qualifications in effect so long as required for the
distribution of the Securities, except that the Company shall not be
required in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.
(v) The Company will furnish to the Underwriters copies of the
Registration Statement (three of which will be signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and all amendments
and supplements (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations) to such documents, in each case as soon as
available and in such quantities as you may from time to time reasonably
request.
(vi) During a period of five years commencing with the date
hereof, the Company will furnish to the Representatives, and to each
Underwriter who may so request in writing, copies of all periodic and
special reports furnished to the stockholders of the
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Company and all information, documents and reports filed with the
Commission, the National Association of Securities Dealers, Inc., the
Nasdaq National Market or any securities exchange.
(vii) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than 15 months
after the end of the Company's current fiscal quarter, an earnings
statement (which need not be audited) covering a 12-month period beginning
after the effective date of the Registration Statement that shall satisfy
the provisions of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations.
(viii) The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming
effective under the provisions of Section 9(a) hereof or is terminated,
will pay or cause to be paid (A) all expenses (including transfer taxes
allocated to the respective transferees) incurred in connection with the
delivery to the Underwriters of the Securities, (B) all expenses and fees
(including, without limitation, fees and expenses of the Company's
accountants and counsel but, except as otherwise provided below, not
including fees of the Underwriters' counsel) in connection with the
preparation, printing, filing, delivery, and shipping of the Registration
Statement (including the financial statements therein and all amendments,
schedules, and exhibits thereto), the Securities, each Preliminary
Prospectus, the Prospectus, and any amendment thereof or supplement
thereto, and the printing, delivery, and shipping of this Agreement and
other underwriting documents, including Blue Sky Memoranda, (C) all filing
fees and fees and disbursements of the Underwriters' counsel incurred in
connection with the qualification of the Securities for offering and sale
by the Underwriters or by dealers under the securities or blue sky laws of
the states and other jurisdictions which you shall designate in accordance
with Section 4(a)(iv) hereof, (D) the fees and expenses of any transfer
agent or registrar, (E) the filing fees incident to, and the reasonable
fees and disbursements of counsel to the Underwriters in connection with,
any required review by the National Association of Securities Dealers, Inc.
of the terms of the sale of the Securities, (F) listing fees, if any, and
(G) all other costs and expenses incident to the performance of the
Company's obligations hereunder that are not otherwise specifically
provided for herein. If the sale of the Securities provided for herein is
not consummated by reason of action by the Company pursuant to Section 9(a)
hereof which prevents this Agreement from becoming effective, or by reason
of any failure, refusal or inability on the part of the Company or the
Selling Stockholders to perform any agreement on its or their part to be
performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled by the Company or the Selling
Stockholders is not fulfilled, the Company will reimburse the several
Underwriters for all out-of-pocket disbursements (including fees and
disbursements of counsel) incurred by the Underwriters in connection with
their investigation, preparing to market and marketing the Securities or in
contemplation of performing their obligations hereunder. The Company shall
not in
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any event be liable to any of the Underwriters for loss of anticipated
profits from the transactions covered by this Agreement.
(ix) The Company will apply the net proceeds from the sale of
the Securities to be sold by it hereunder for the purposes set forth in the
Prospectus and will file such reports with the Commission with respect to
the sale of the Securities and the application of the proceeds therefrom as
may be required in accordance with Rule 463 of the Rules and Regulations.
(x) During the 180-day period following the date of the
Prospectus, the Company will not, without the prior written consent of U.S.
Bancorp Piper Jaffray Inc., offer for sale, sell, contract to sell, grant
any option for the sale of or otherwise issue or dispose of any Common
Stock or any securities convertible into or exchangeable for, or any
options, swaps, collars or other derivatives on or rights to purchase or
acquire, Common Stock, except that the foregoing shall not apply to (i) the
Securities to be sold to the Underwriters pursuant to this Agreement, (ii)
shares of Common Stock issued by the Company upon the exercise of an option
or warrant or the conversion of a security or pursuant to any other
commitment outstanding on the date hereof and referred to in the
Prospectus, (iii) options to purchase Common Stock under any stock option,
stock bonus or other stock plan or arrangement described in the Prospectus,
provided that no such options will become exercisable during such 180-day
period, or (iv) shares of Common Stock issued as payment for all or part of
the purchase price of an acquisition by the Company or any of its
subsidiaries of another company or business, provided that each person or
entity receiving any such shares in connection with such acquisition agrees
in writing with U.S. Bancorp Piper Jaffray Inc. not to sell, offer, dispose
of or otherwise transfer any such share during the remainder of such 180-
day period without the prior written consent of U.S. Bancorp Piper Jaffray
Inc.
(xi) The Company either has caused to be delivered to you or
will cause to be delivered to you prior to the effective date of the
Registration Statement a letter in the form of Exhibit A hereto from each
of the persons listed on Schedule III hereto.
(xii) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities, and has not effected any sales of Common
Stock which are required to be disclosed in response to Item 701 of
Regulation S-K under the Act which have not been so disclosed in the
Registration Statement.
(xiii) The Company will not incur any liability for any finder's
or broker's fee or agent's commission in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
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(b) Each Selling Stockholder, severally and not jointly, covenants
and agrees with the several Underwriters as follows:
(i) Except as otherwise agreed to by the Company and the
Selling Stockholder, such Selling Stockholder will pay all taxes, if any,
on the transfer and sale, respectively, of the Securities being sold by
such Selling Stockholder and the fees of such Selling Stockholder's
counsel. In addition, each Selling Stockholder severally agrees to
reimburse the Company for any reimbursement made by the Company to the
Underwriters pursuant to Section 4(a)(viii) hereof to the extent such
reimbursement resulted from the failure or refusal on the part of such
Selling Stockholder to comply under the terms or fulfill any of the
conditions of this Agreement.
(ii) The Securities to be sold by such Selling Stockholder,
represented by the certificates on deposit with the Custodian pursuant to
the Custody Agreement of such Selling Stockholder, are subject to the
interest of the several Underwriters and the other Selling Stockholders;
the arrangements made for such custody are, except as specifically provided
in the Custody Agreement, irrevocable; and the obligations of such Selling
Stockholder hereunder shall not be terminated, except as provided in this
Agreement or in the Custody Agreement, by any act of such Selling
Stockholder, by operation of law, whether by the death of such Selling
Stockholder or by the occurrence of any other event. If any such event
should occur before the delivery of the Securities hereunder, certificates
for the Securities deposited with the Custodian shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement and
the Custody Agreement as if such event had not occurred, whether or not the
Custodian shall have received notice thereof.
(iii) Such Selling Stockholder will not, except to the
Underwriters pursuant to this Agreement, without the prior written consent
of U.S. Bancorp Piper Jaffray Inc., directly or indirectly, sell, offer,
contract or grant any option to sell (including without limitation any
short sale), pledge, transfer, establish an open "put equivalent position"
within the meaning of Rule 16a-l(h) under the Securities Exchange Act of
1934, as amended, or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined
in Rule 13d-3 under Securities Exchange Act of 1934, as amended) by such
Selling Stockholder or publicly announce such Selling Stockholder's
intention to do any of the foregoing, for a period commencing on the date
hereof and continuing through the close of trading on the date one hundred
eighty days after the date of the Prospectus, except with respect to any
transfer (A) to any trust for the direct or indirect benefit of such
Selling Stockholder or the immediate family of such Selling Stockholder or
(B) to any member of the immediate family of such Selling Stockholder,
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provided, that in each case, the transferee agrees to be bound by the
restrictions set forth herein and such transfer does not involve a
disposition for value.
(iv) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Securities.
(v) Such Selling Stockholder shall immediately notify you of any
change in information relating to such Selling Stockholder stated in the
Prospectus or any supplement thereto (including any term sheet within the
meaning of Rule 434 of the Rules and Regulations), which results in the
Prospectus (as supplemented) including an untrue statement of a material
fact or omitting to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
5. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
several Underwriters hereunder are subject to the accuracy, as of the date
hereof and at each of the First Closing Date and the Second Closing Date (as if
made at such Closing Date), of and compliance with all representations,
warranties and agreements of the Company and the Selling Stockholders contained
herein, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., Central time, on the date of this Agreement, or such later time
and date as you, as Representatives of the several Underwriters, shall approve
and all filings required by Rules 424, 430A and 434 of the Rules and Regulations
shall have been timely made; no stop order suspending the effectiveness of the
Registration Statement or any amendment thereof shall be in effect; no
proceedings for the issuance of such an order shall have been initiated or
threatened by the Commission; and any request of the Commission for additional
information (to be included in the Registration Statement or Prospectus or
otherwise) shall have been complied with to your reasonable satisfaction.
(b) Except as disclosed in or contemplated by the Prospectus,
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, (A) the Company and its subsidiaries,
considered as one entity, shall not have incurred any material liability or
obligation, direct or contingent, other than in the ordinary course of business,
or entered into any material transaction not in the ordinary course of business;
(B) there shall not have been any dividend or distribution of any kind declared
or paid with respect to the Company's capital stock; and (C) there shall not
have been any change in the capital stock (other than a change in the number of
outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants), or any material change in the
short-term or long-term debt of the Company, or any issuance of options,
warrants, convertible securities or
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other rights to purchase the capital stock of the Company or any of its
subsidiaries, or any Material Adverse Change, or any development that could
reasonably be expected to result in a prospective Material Adverse Change, the
effect of which, in any such case described in clause (A), (B) or (C), is, in
your judgment, so material and adverse as to make it impractical or inadvisable
to offer or deliver the Securities on the terms and in the manner contemplated
in the Prospectus.
(c) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, the opinion of Hale and Dorr LLP,
counsel for the Company, dated such Closing Date and addressed to you, to the
effect that:
(i) Each of the Company and Linkage, Inc., a Massachusetts
corporation and a wholly-owned subsidiary of the Company ("Linkage
Massachusetts"), has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and Linkage Massachusetts has corporate
power and authority to own its properties and conduct its business as
currently being carried on and as described in the Registration Statement
and the Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction listed on Schedule
A to such opinion, which to such counsel's knowledge are the only
jurisdictions in which the Company owns or leases real property.
(ii) The capital stock of the Company conforms as to legal
matters in all material respects to the description thereof contained in
the Prospectus under the caption "Description of Capital Stock." All of
the issued and outstanding shares of the capital stock of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable. The Securities to be issued and sold by the Company
hereunder have been duly authorized and, when issued, delivered and paid
for in accordance with the terms of this Agreement, will have been validly
issued and will be fully paid and nonassessable. Except as otherwise
disclosed in the Registration Statement or Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Common Stock
pursuant to the Company's charter, by-laws or any agreement or other
instrument known to such counsel to which the Company is a party or by
which the Company is bound (other than pursuant to provisions of
agreements, which provisions will terminate upon the First Closing Date).
To such counsel's knowledge, neither the filing of the Registration
Statement nor the offering or sale of the Securities as contemplated by
this Agreement gives rise to any rights for or relating to the registration
of any shares of Common Stock or other securities of the Company.
(iii) All of the issued and outstanding shares of capital stock
of Linkage Massachusetts have been duly and validly authorized and issued
and are fully paid and nonassessable, and, to such counsel's knowledge,
except as otherwise described in the Registration Statement or Prospectus
and except for directors' qualifying shares, the
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Company owns of record all of the issued and outstanding shares of such
stock. To such counsel's knowledge, except as described in or contemplated
by the Registration Statement or Prospectus and except for subsequent
issues, if any, pursuant to employee stock plans described in the
Prospectus, there are no options, warrants, agreements, contracts or other
rights in existence to purchase or acquire from the Company or any
subsidiary any shares of the capital stock of the Company or any subsidiary
of the Company.
(iv) The Registration Statement has been declared effective by
the Commission under the Act and, to counsel's knowledge, (A) no stop order
suspending the effectiveness of the Registration Statement has been issued
and (B) no proceeding for that purpose has been instituted or threatened by
the Commission.
(v) The statements (A) in the Prospectus under the captions
"Risk Factors -- Future sales by existing stockholders could depress the
market price of our common stock," "Description of Capital Stock" and
"Shares Eligible for Future Sale" and (B) in Items 14 and 15 of the
Registration Statement, insofar as such statements constitute matters of
law or legal conclusions, have been reviewed by such counsel and are
correct in all material respects; such counsel does not know of any
contracts or documents required by the Act or by the Rules and Regulations
thereunder to be filed as exhibits to the Registration Statement or
described in the Registration Statement or Prospectus which are not so
filed or described as required; and such counsel knows of no legal
proceedings pending or threatened against the Company or any of it
subsidiaries required to be described in the Prospectus which are not
described as required.
(vi) The Company has corporate power and authority to enter into
this Agreement, and this Agreement has been duly authorized, executed and
delivered by the Company; the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions herein contemplated (other than performance by the Company of
its obligations under the indemnification and contribution section of this
Agreement, as to which no opinion need be rendered) will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, (A) any Federal or Massachusetts state statute, rule or
regulation (other than state securities laws), (B) any agreement or
instrument to which the Company is a party and filed as an exhibit to the
Registration Statement, (C) the Company's charter or by-laws, or (D) any
court order or decree known to such counsel and specifically naming the
Company; and no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
Company's execution, delivery and performance of this Agreement or for the
Company's consummation of the transactions contemplated hereby, including
the issuance or sale of the Securities by the Company, except such as may
be required under the Act or state securities laws or by the NASD (as to
which no opinion need be expressed).
(vii) The Registration Statement and the Prospectus and any
amendment
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thereof or supplement thereto (including any term sheet within the meaning
of Rule 434 of the Rules and Regulations, but excluding the financial
statements, including the notes and schedules thereto, and other financial
or accounting data included in the Registration Statement or Prospectus or
any such amendments or supplements thereto, as to which no opinion need be
expressed), when filed and when declared effective, complied as to form in
all material respects with the requirements of the Act and the Rules and
Regulations.
(viii) The Company is not, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus will not be, an "investment
company" or an entity "controlled" by an "investment company" as such terms
are defined in 1940 Act.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of and counsel for the Underwriters, at
which conferences such counsel made inquiries of such persons and others and
discussed the contents of the Registration Statement and the Prospectus and any
supplements or amendments thereto. Such counsel shall also state that while the
limitations inherent in the independent verification of factual matters and the
character of determinations involved in the registration process are such that
such counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or Prospectus, or any supplements or amendments thereto,
subject to and on the basis of such participation, inquiries and discussions, no
facts have come to the attention of such counsel which have caused them to
believe that either the Registration Statement or any amendments thereto, at the
time the Registration Statement or any such amendments became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus, as of its date or at the First Closing
Date or the Second Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that such counsel need
express no belief as to the financial statements, including the notes and
schedules thereto, or any other financial or accounting data included in the
Registration Statement or Prospectus or any such amendments or supplements
thereto).
In rendering such opinion such counsel may (i) state that they render no
opinion as to matters of law other than the General Corporation Law statute of
the State of Delaware, the law of The Commonwealth of Massachusetts and federal
law of the United States and (ii) rely as to matters of fact, to the extent such
counsel deems reasonable, upon certificates of officers of the Company and its
subsidiaries.
(d) On the First Closing Date there shall have been furnished to you,
as Representatives of the several Underwriters, the opinion of Hale and Dorr
LLP, counsel for
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the Selling Stockholders, dated the First Closing Date and addressed to you, to
the effect that:
(i) To such counsel's knowledge, based solely on its review of
the corporate and stock record books of the Company, each of the Selling
Stockholders is the record owner of the Securities to be sold by such
Selling Stockholder and, upon the Underwriters obtaining control of the
Securities to be sold by the Selling Stockholders, and assuming the
Underwriters purchased such Securities for value and without notice of any
adverse claim to such Securities within the meaning of Section 8-102 of the
Uniform Commercial Code as in effect in The Commonwealth of Massachusetts,
the Underwriters will have acquired all the rights of the Selling
Stockholder in such Securities, free and clear of any adverse claim, any
lien in favor of the Company and any restrictions on transfer imposed by
the Company.
(ii) This Agreement, the Custody Agreements and the Powers of
Attorney have been duly and validly executed and delivered by (or by the
Attorneys-in-Fact, or either of them, on behalf of) the Selling
Stockholders and the Custody Agreements and the Powers of Attorney are
valid and binding agreements of the Selling Stockholders, enforceable
against the Selling Stockholders in accordance with their respective terms
(except as rights to indemnity and contribution hereunder or thereunder may
be limited by federal or state securities laws or matters of public policy
and except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and
subject to general principles of equity).
(iii) The execution and delivery by each of the Selling
Stockholders of this Agreement, the Custody Agreement and the Power of
Attorney and the performance by each of the Selling Stockholders of the
terms hereof and thereof and the consummation by each of the Selling
Stockholders of the transactions herein and therein contemplated will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, (A) any Federal or Massachusetts state statute,
rule or regulation or (B) any court order or decree known to such counsel
and specifically naming any such Selling Stockholder; and no consent,
approval, authorization or order of, or filing with, any court or
governmental agency or body is required for such Selling Stockholder's
execution, delivery and performance of this Agreement, the Custody
Agreement and the Power of Attorney or for such Selling Stockholder's
consummation of the transactions contemplated hereby and thereby, including
the sale of the Securities being sold by such Selling Stockholder, except
such as may be required under the Act or state securities laws or blue sky
laws or by the NASD (as to which such counsel need not express any
opinion).
In rendering such opinion such counsel may (i) state that they
render no opinion as to matters of law other than the General Corporation
Law statute of the State of Delaware, the law of The Commonwealth of
Massachusetts and federal law of the United States and (ii) as to matters
of fact, to the extent such counsel deems reasonable upon certificates of
the Selling Stockholders.
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(e) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, such opinion or opinions from Ropes
& Gray, counsel for the several Underwriters, dated such Closing Date and
addressed to you, with respect to the formation of the Company, the validity of
the Securities, the Registration Statement, the Prospectus and other related
matters as you reasonably may request, and such counsel shall have received such
papers and information as they request to enable them to pass upon such matters.
(f) On each Closing Date you, as Representatives of the several
Underwriters, shall have received a letter of Deloitte & Touche LLP, dated such
Closing Date and addressed to you, confirming that they are independent public
accountants within the meaning of the Act and are in compliance with the
applicable requirements relating to the qualifications of accountants under Rule
2-01 of Regulation S-X of the Commission, and stating, as of the date of such
letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the date of such
letter), the conclusions and findings of said firm with respect to the financial
information and other matters covered by its letter delivered to you
concurrently with the execution of this Agreement, and the effect of the letter
so to be delivered on such Closing Date shall be to confirm the conclusions and
findings set forth in such prior letter.
(g) On each Closing Date, there shall have been furnished to you, as
Representatives of the Underwriters, a certificate, dated such Closing Date and
addressed to you, signed by the chief executive officer and by the chief
financial officer of the Company, in their capacity as such, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, in all material respects, as if made at and
as of such Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date;
(ii) No stop order or other order suspending the effectiveness
of the Registration Statement or any amendment thereof or the qualification
of the Securities for offering or sale is in effect, and no proceeding for
that purpose, to the best of their knowledge, has been instituted or is
contemplated by the Commission or any state or regulatory body; and
(iii) For the period from and after the date of this Agreement
and prior to such Closing Date, there has not occurred any Material Adverse
Change.
(h) On the First Closing Date there shall have been furnished to you,
as Representatives of the several Underwriters, a certificate or certificates,
dated the First Closing Date and addressed to you, signed by each of the Selling
Stockholders or either of such Selling Stockholder's Attorneys-in-Fact to the
effect that the representations and warranties of such Selling Stockholder
contained in this Agreement are true and correct as if made at and as of such
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Closing Date, and that such Selling Stockholder has complied with all the
agreements and satisfied all the conditions on such Selling Stockholder's part
to be performed or satisfied at or prior to such Closing Date.
(i) The Company shall have furnished to you and counsel for the
Underwriters such additional documents, certificates and evidence as you or they
may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Securities as contemplated herein, or in order to
evidence the accuracy of any of the representations and warranties, or the
satisfaction of any of the conditions or agreements, herein contained.
(j) The Common Stock shall have been approved for listing on the
Nasdaq National Market, subject only to official notice of issuance.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and counsel for the Underwriters. The
Company will furnish you with such conformed copies of such opinions,
certificates, letters and other documents as you shall reasonably request.
6. Indemnification and Contribution.
--------------------------------
(a) The Company, its subsidiaries and each Selling Stockholder,
jointly and severally, agree to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, to which such Underwriter
may become subject, under the Act or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company and/or such Selling Stockholders, as the case may be), insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, including the information
deemed to be a part of the Registration Statement at the time of effectiveness
pursuant to Rules 430A and 434(d) of the Rules and Regulations, if applicable,
any Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto (including any term sheet within the meaning of Rule 434 of the Rules
and Regulations), or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending against such loss, claim, damage,
liability or action; provided, however, that (i) none of the Company, its
subsidiaries or any Selling Stockholder shall be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
you, or by or on behalf of any Underwriter through you, specifically for use in
the preparation thereof and (ii) with respect to any Preliminary Prospectus, the
foregoing indemnity and reimbursement arrangement shall not inure to the benefit
of any
-23-
<PAGE>
Underwriter from whom the person asserting any loss, claim, damage, liability or
expense purchased Securities, or any person controlling such Underwriter, if
copies of the Prospectus were timely delivered to the Underwriter pursuant to
this Agreement and the copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of such Underwriter to such person at or prior
to the written confirmation of the sale of the Securities to such person, and if
the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage, liability or expense; and further
provided, however, that in no event shall any Selling Stockholder be liable
under the provisions of this Section 6, together with any liability for breach
of the representation of such Selling Stockholder contained in Section
2(b)(vii), for any amount in excess of the aggregate amount of proceeds received
by such Selling Stockholder from the sale of the Securities pursuant to this
Agreement.
(b) Each Underwriter will indemnify and hold harmless the Company, its
subsidiaries and each Selling Stockholder against any losses, claims, damages or
liabilities to which the Company, its subsidiaries and the Selling Stockholders
may become subject, under the Act or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, including the information deemed to be a part of the Registration
Statement at the time of effectiveness pursuant to Rules 430A and 434(d) of the
Rules and Regulations, if applicable, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto (including any term sheet
within the meaning of Rule 434 of the Rules and Regulations), or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, any Preliminary Prospectus, the Prospectus, or
any such amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by or on behalf of you, or by or on
behalf of such Underwriter through you, specifically for use in the preparation
thereof, and will reimburse the Company, its subsidiaries and the Selling
Stockholders for any legal or other expenses reasonably incurred by the Company,
its subsidiaries or any such Selling Stockholder in connection with
investigating or defending against any such loss, claim, damage, liability or
action. This indemnity agreement shall be in addition to any liabilities which
any such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
that it may have to any indemnified party, except to the extent the indemnifying
party is prejudiced thereby. In case any such action shall be brought against
any indemnified party, and it shall notify the
-24-
<PAGE>
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of the indemnifying
party's election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that if
the indemnified party reasonably determines that there is or may be a conflict
between the positions of the indemnifying party or parties and the indemnified
party in conducting the defense of such action, then counsel for the indemnified
party shall be entitled to conduct the defense to the extent relating to matters
that are subject to such conflict, and in that event the fees and expenses of
such counsel for the indemnified party shall be paid by the indemnifying party
or parties; provided, however, that the indemnifying party or parties shall not
be liable for the fees and expenses of more than one separate firm for all such
indemnified parties. An indemnifying party shall not be obligated under any
settlement agreement relating to any action under this Section 6 to which it has
not agreed in writing. The indemnifying party shall have the right to settle any
action without the consent of any indemnified party, provided that such
settlement includes a complete release of the indemnified party with respect to
the subject matter thereof.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above, (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company, its subsidiaries and the Selling Stockholders on the one hand
and the Underwriters on the other from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, its
subsidiaries and the Selling Stockholders on the one hand and the Underwriters
on the other in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, its
subsidiaries and the Selling Stockholders on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Stockholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or the Underwriters on the other and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, its subsidiaries, the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this
-25-
<PAGE>
subsection (d) were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first sentence of this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending against any
action or claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), (A) no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, (B) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation and (C) the aggregate liability of the Selling Stockholders
with respect to any claim for contribution shall be limited as provided in
Section 6(a) above. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company, its subsidiaries and the Selling
Stockholders under this Section 6 shall be in addition to any liability which
the Company, its subsidiaries and the Selling Stockholders may otherwise have
and shall extend, upon the same terms and conditions, to each person, if any,
who controls any Underwriter within the meaning of the Act; and the obligations
of the Underwriters under this Section 6 shall be in addition to any liability
that the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each director of the Company (including any person
who, with his consent, is named in the Registration Statement as about to become
a director of the Company), to each officer of the Company who has signed the
Registration Statement and to each person, if any, who controls the Company or
any Selling Stockholder within the meaning of the Act.
7. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties, and agreements of the Company herein or in
certificates delivered pursuant hereto, and the agreements of the several
Underwriters, the Company and the Selling Stockholders contained in Section 6
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person
thereof, or the Company or any of its officers, directors, or controlling
persons, or any Selling Stockholders or any controlling person thereof, and
shall survive delivery of, and payment for, the Securities to and by the
Underwriters hereunder.
-26-
<PAGE>
8. Substitution of Underwriters.
----------------------------
(a) If any Underwriter or Underwriters shall fail to take up and pay
for the amount of Firm Shares agreed by such Underwriter or Underwriters to be
purchased hereunder, upon tender of such Firm Shares in accordance with the
terms hereof, and the amount of Firm Shares not purchased does not aggregate
more than 10% of the total amount of Firm Shares set forth in Schedule II
hereto, the remaining Underwriters shall be obligated to take up and pay for (in
proportion to their respective underwriting obligations hereunder as set forth
in Schedule II hereto except as may otherwise be determined by you) the Firm
Shares that the withdrawing or defaulting Underwriters agreed but failed to
purchase.
(b) If any Underwriter or Underwriters shall fail to take up and pay
for the amount of Firm Shares agreed by such Underwriter or Underwriters to be
purchased hereunder, upon tender of such Firm Shares in accordance with the
terms hereof, and the amount of Firm Shares not purchased aggregates more than
10% of the total amount of Firm Shares set forth in Schedule II hereto, and
arrangements satisfactory to you for the purchase of such Firm Shares by other
persons are not made within 36 hours thereafter, this Agreement shall terminate.
In the event of any such termination neither the Company nor any Selling
Stockholder shall be under any liability to any Underwriter (except to the
extent provided in Section 4(a)(viii)and Section 6 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the amount of Firm
Shares agreed by such Underwriter to be purchased hereunder) be under any
liability to the Company or the Selling Stockholders (except to the extent
provided in Section 6 hereof).
If Firm Shares to which a default relates are to be purchased by the
non-defaulting Underwriters or by any other party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date for not more than seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be effected. Any action taken under this
Section 8 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement. As used herein, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section 8.
9. Termination of this Agreement.
-----------------------------
(a) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time prior to the First Closing Date, and the option referred to in
Section 3(b), if exercised, may be canceled at any time prior to the Second
Closing Date, if (i) in the reasonable judgment of the Representatives there
shall have occurred any Material Adverse Change, (ii) trading on the New York
Stock Exchange or the American Stock Exchange shall have been wholly suspended,
(iii) minimum or maximum prices for trading shall have been fixed, or maximum
ranges for prices for securities shall have been required, on the New York Stock
Exchange or the American Stock Exchange, by such
-27-
<PAGE>
Exchange or by order of the Commission or any other governmental authority
having jurisdiction, (iv) a banking moratorium shall have been declared by
Federal, New York or Minnesota authorities, or (v) there has occurred any
material adverse change in the financial markets in the United States or an
outbreak of major hostilities (or an escalation thereof) in which the United
States is involved, a declaration of war by Congress, any other substantial
national or international calamity or any other event or occurrence of a similar
character shall have occurred since the execution of this Agreement that, in
your judgment, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Securities. Any such termination
shall be without liability of any party to any other party except that the
provisions of Section 4(a)(viii) and Section 6 hereof shall at all times be
effective.
(b) If you elect to terminate this Agreement as provided in this
Section, the Company and an Attorney-in-Fact, on behalf of the Selling
Stockholders, shall be notified promptly by you by telephone or telegram,
confirmed by letter, and such action shall be effective only upon such
notification.
10. Default by One or More of the Selling Stockholders or the Company.
-----------------------------------------------------------------
If one or more of the Selling Stockholders shall fail at the First Closing Date
to sell and deliver the number of Securities which such Selling Stockholder or
Selling Stockholders are obligated to sell hereunder, and the remaining Selling
Stockholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number of Securities to be sold by all Selling Stockholders as set forth in
Schedule I, then the Underwriters may at your option, by notice from you to the
Company and the non-defaulting Selling Stockholders, either (a) terminate this
Agreement without any liability on the part of any non-defaulting party or (b)
elect to purchase the Securities which the Company and the non-defaulting
Selling Stockholders have agreed to sell hereunder.
In the event of a default by any Selling Stockholder as referred to in this
Section, either you or the Company or, by joint action only, the non-defaulting
Selling Stockholders shall have the right to postpone the First Closing Date for
a period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
If the Company shall fail at the First Closing Date to sell and deliver the
number of Securities which it is obligated to sell hereunder, then this
Agreement shall terminate without any liability on the part of any non-
defaulting party. No action taken pursuant to this Section shall relieve the
Company, its subsidiaries or any Selling Stockholders so defaulting from
liability, if any, in respect of such default.
11. Information Furnished by the Underwriters. The statements set forth
-----------------------------------------
in under the caption "Underwriting" in any Preliminary Prospectus and in the
Prospectus constitute the written information furnished by or on behalf of the
Underwriters referred to in Section 2 and Section 6 hereof.
-28-
<PAGE>
12. Notices. Except as otherwise provided herein, all communications
-------
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to the Representatives c/o U.S. Bancorp
Piper Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis,
Minnesota 55402; if to the Company, shall be mailed, telegraphed or delivered to
it at One Forbes Road, Lexington, Massachusetts 02421, Attention: Larry R.
Carr, with a copy to Hale and Dorr LLP, 60 State Street, Boston, Massachusetts
02109, Attention: Hal J. Leibowitz, Esq.; if to any of the Selling
Stockholders, at the address of the Attorneys-in-Fact as set forth in the Powers
of Attorney with a copy to Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, Attention: Hal J. Leibowitz, Esq., or in each case to such
other address as the person to be notified may have requested in writing. All
notices given by telegram shall be promptly confirmed by letter. Any party to
this Agreement may change such address for notices by sending to the parties to
this Agreement written notice of a new address for such purpose.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure
----------------------------------------
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers and directors
referred to in Section 6. Nothing in this Agreement is intended or shall be
construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision
herein contained. The term "successors and assigns" as herein used shall not
include any purchaser, as such purchaser, of any of the Securities from any of
the several Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Minnesota.
[Signature Page Follows]
-29-
<PAGE>
Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement between the
Company, the Selling Stockholders and the several Underwriters in accordance
with its terms.
Very truly yours,
Linkage Solutions, Inc.
By ____________________________________
**[Title]
Selling Stockholders
By ____________________________________
Attorney-in-Fact
Confirmed as of the date first
above mentioned, on behalf of
themselves and the other several
Underwriters named in Schedule II
hereto.
U.S. Bancorp Piper Jaffray inc.
BancBoston Robertson Stephens Inc.
By: U.S. Bancorp Piper Jaffray inc.
By ______________________________
Managing Director
<PAGE>
The undersigned join this letter solely for the purposes of Sections 6, 7,
9 and 10.
Linkage, Inc.
By __________________________________
**[Title]
Linkage International Limited
By __________________________________
**[Title]
High, Maley & Milhorn, Inc.
By __________________________________
**[Title]
<PAGE>
SCHEDULE I
Selling Stockholders
Number of
Name Firm Shares to be Sold
- ---- ----------------------
_________________
Total________
=================
<PAGE>
SCHEDULE II
Underwriter Number of Firm Shares (1)
- ----------- -------------------------
_______________
Total________
===============
_________________
(1) The Underwriters may purchase up to an additional ______ Option Shares,
to the extent the option described in Section 3(b) of the Agreement is
exercised, in the proportions and in the manner described in the Agreement.
<PAGE>
SCHEDULE III
Persons Subject to Lock-up Agreement
------------------------------------
<PAGE>
EXHIBIT A
Form of Lock-Up Agreement
-------------------------
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as of
---------
this ___ day of March 1999, pursuant to Section 78 of Chapter 156B of the
Massachusetts General Laws (the "M.G.L."), by and among Linkage, Inc., a
------
Massachusetts corporation ("Linkage (Massachusetts)"), Linkage Solutions, Inc.,
-----------------------
a Delaware corporation and a wholly owned subsidiary of Linkage (Massachusetts)
("Linkage (Delaware)"), and Linkage Transitory Corp., a Massachusetts
------------------
corporation and a wholly owned subsidiary of Linkage (Delaware) (the "Transitory
----------
Subsidiary").
- ----------
WITNESSETH:
WHEREAS, Linkage (Massachusetts) is a corporation duly organized and
existing under the laws of the Commonwealth of Massachusetts and is authorized
to issue 100,000 shares of Common Stock, no par value per share, of which
[11,300] shares are issued and outstanding and held by an aggregate of 12
stockholders (the "Stockholders") as of the date hereof;
------------
WHEREAS, Linkage (Delaware) is a corporation duly organized and existing
under the laws of the State of Delaware and is authorized to issue 30,000,000
shares of Common Stock, $.01 par value per share, of which 100 shares are issued
and outstanding and held by Linkage (Massachusetts) as of the date hereof;
WHEREAS, the Transitory Subsidiary is a corporation duly organized and
existing under the laws of the Commonwealth of Massachusetts and is authorized
to issue 200,000 shares of Common Stock, $.01 par value per share, of which 100
shares are issued and outstanding and held by Linkage (Delaware) as of the date
hereof;
WHEREAS, the Transitory Subsidiary desires to merge itself into Linkage
(Massachusetts);
WHEREAS, Linkage (Massachusetts) desires that the Transitory Subsidiary be
merged into itself;
WHEREAS, this Agreement contemplates a merger of the Transitory Subsidiary
with and into Linkage (Massachusetts) in which the Stockholders will receive
capital stock of Linkage (Delaware) in exchange for their shares of capital
stock of Linkage (Massachusetts), with Linkage (Massachusetts) being the
surviving corporation and a wholly owned subsidiary of Linkage (Delaware); and
WHEREAS, the Boards of Directors of Linkage (Massachusetts), Linkage
(Delaware) and the Transitory Subsidiary have each approved and adopted this
Agreement.
<PAGE>
NOW THEREFORE, in consideration of the foregoing premises and the
undertakings herein contained and for other good valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Merger. The Transitory Subsidiary shall be merged into Linkage
------
(Massachusetts) pursuant to Section 78 of Chapter 156B of the M.G.L. at the
Effective Time (as defined below). Linkage (Massachusetts) shall survive the
merger herein contemplated and shall continue to be governed by the laws of the
Commonwealth of Massachusetts (the "Surviving Corporation"). The separate
---------------------
corporate existence of the Transitory Subsidiary shall cease forthwith at the
Effective Time (as defined below). The merger of the Transitory Subsidiary into
Linkage (Massachusetts) shall herein be referred to as the "Merger."
------
2. Stockholder Approval. As soon as practicable after the execution of
--------------------
this Agreement, the Transitory Subsidiary and Linkage (Massachusetts) shall, if
necessary under Chapter 156B of the M.G.L., submit this Agreement to their
respective stockholders for approval.
3. Effective Time. The Merger shall be effective upon the filing of
--------------
Articles of Merger with the Secretary of State of the Commonwealth of
Massachusetts, which filing shall be made after all required stockholder
approvals have been obtained. The time of such effectiveness shall herein be
referred to as the "Effective Time."
--------------
4. Common Stock of the Transitory Subsidiary. At the Effective Time, by
-----------------------------------------
virtue of the Merger and without any action on the part of the holder thereof,
each share of Common Stock of the Transitory Subsidiary issued and outstanding
immediately prior thereto shall cease to exist and shall be changed and
converted into one fully paid and non-assessable share of the Common Stock, $.01
par value per share, of the Surviving Corporation.
5. Common Stock of Linkage (Delaware). At the Effective Time, by virtue
----------------------------------
of the Merger and without any action on the part of the holder thereof, each
share of Common Stock of Linkage (Delaware) issued and outstanding immediately
prior thereto shall cease to exist and shall be cancelled.
6. Common Stock of Linkage (Massachusetts). At the Effective Time, by
---------------------------------------
virtue of the Merger and without any action on the part of the holder thereof,
each share of Common Stock of Linkage (Massachusetts) issued and outstanding
immediately prior thereto (other than Dissenting Shares, as such term is defined
in Section 7) shall cease to exist and shall be changed and converted into the
right to receive [770] fully paid and non-assessable shares of the Common Stock,
$.01 par value per share, of Linkage (Delaware). Each share of Common Stock of
Linkage (Massachusetts) held in the treasury of Linkage (Massachusetts)
immediately prior to the Effective Time shall be cancelled and retired without
payment of any consideration therefor.
-2-
<PAGE>
7. Dissenting Shares. For purposes of this Agreement, "Dissenting
----------------- ----------
Shares" means shares of Common Stock of Linkage (Massachusetts) held at the
Effective Time by a Stockholder who has not voted such shares in favor of the
Merger and with respect to which dissenters' rights have been duly demanded and
perfected in accordance with Chapter 156B, Section 85 through Section 98, of the
M.G.L. Dissenting Shares shall not be converted into or represent the right to
receive shares of Linkage (Delaware). Holders of Dissenting Shares shall have
only such rights as are provided under the M.G.L.
8. Stock Certificates. From and after the Effective Time, each holder of
------------------
an outstanding certificate or certificates which represented, immediately prior
to the Effective Time, shares of Common Stock of Linkage (Massachusetts)
converted into shares of Common Stock of Linkage (Delaware) pursuant to Section
6 ("Certificates") shall have the right to surrender each Certificate to Linkage
------------
(Delaware), and receive in exchange therefor a certificate representing the
number of shares of Common Stock of Linkage (Delaware) issuable pursuant to
Section 6. Until surrendered, each outstanding Certificate which prior to the
Effective Time represented shares of Common Stock of Linkage (Massachusetts)
shall be deemed for all purposes to evidence the right to receive the number of
shares of Common Stock of Linkage (Delaware) into which the shares of Common
Stock of Linkage (Massachusetts) have been converted. From and after the
Effective Time, the holders of shares of Common Stock of Linkage (Massachusetts)
shall cease to have any rights in respect of such shares and their rights shall
be solely in respect of the shares of Common Stock of Linkage (Delaware) into
which such shares have been converted. From and after the Effective Time, there
shall be no further registration of transfers on the records of Linkage
(Massachusetts) of shares of Common Stock of Linkage (Massachusetts) outstanding
immediately prior to the Effective Time.
9. Stock Options. At the Effective Time and notwithstanding the
-------------
provisions of Section 10 of this Agreement, Linkage (Delaware) shall assume (i)
the 1995 Stock Option Plan of Linkage (Massachusetts) (the "1995 Plan") and (ii)
---------
all options to purchase shares of Common Stock of Linkage (Massachusetts)
granted pursuant to the 1995 Plan which shall be outstanding immediately prior
to the Effective Time (the "Options"). At the Effective Time, by virtue of the
-------
Merger and without any action on the part of the holders thereof, each holder of
an Option shall be entitled upon exercise, in accordance with the terms of the
Options, to purchase after the Effective Time [770] shares of Common Stock of
Linkage (Delaware) for each one share of Common Stock of Linkage (Massachusetts)
that such holder is entitled to purchase as provided in the Option, at a price
that is equal to the price per share provided in the Option divided by [770].
Each such Option shall otherwise remain subject to the same terms and conditions
after the Effective Time as were applicable to such Option immediately prior to
the Effective Time.
10. Succession. At the Effective Time, the Surviving Corporation shall
----------
succeed to all of the rights, privileges, debts, liabilities, powers and
property of the Transitory
-3-
<PAGE>
Subsidiary in the manner of and as more fully set forth in Section 80 of Chapter
156B of the M.G.L. Without limiting the foregoing, at the Effective Time, all of
the estate, property, rights, privileges, powers, franchises, patents,
trademarks, licenses, registrations and other assets of every kind and
description of the Transitory Subsidiary shall be transferred to, vested in and
devolved upon the Surviving Corporation without further act or deed and all
property, real, personal and mixed, rights, and every other interest of the
Transitory Subsidiary and Linkage (Massachusetts), and all the debts due on
whatever account to either of them, as well as stock subscriptions and other
choses in action belonging to either of them, shall be as effectively the
property of the Surviving Corporation as they were of the Transitory Subsidiary
and Linkage (Massachusetts), respectively. All rights of creditors of the
Transitory Subsidiary and all liens upon any property of the Transitory
Subsidiary shall be preserved unimpaired, and all debts, liabilities and duties
of the Transitory Subsidiary, including, without limitation, liabilities for
taxes due or to become due, and any claim or demand in any case existing against
the Transitory Subsidiary shall attach to the Surviving Corporation and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
11. Articles of Organization and By-laws. The purposes of the Surviving
------------------------------------
Corporation shall be to engage in the provision of organizational development
and corporate education programs, services and products and to carry on any
other business or activity which may be lawfully carried on by a corporation
organized under the Business Corporation Law of the Commonwealth of
Massachusetts, whether or not related to the foregoing. The total number of
shares and the par value, if any, of each class of stock which the Surviving
Corporation is authorized to issue shall be 200,000 shares of Common Stock, $.01
par value per share. The Articles of Organization of the Transitory Subsidiary
in effect at the Effective Time shall be the Articles of Organization of the
Surviving Corporation until further amended in accordance with the provisions
thereof and applicable law, except that the name of the corporation set forth
therein shall be changed to the name of Linkage (Massachusetts). The By-laws of
the Transitory Subsidiary in effect at the Effective Time shall be the By-laws
of the Surviving Corporation until amended in accordance with the provisions
thereof and applicable law, except that the name of the corporation set forth
therein shall be changed to the name of Linkage (Massachusetts).
12. Directors and Officers. The members of the Board of Directors and the
----------------------
officers of Linkage (Massachusetts) at the Effective Time shall continue in
office as the members of the Board of Directors and the officers of the
Surviving Corporation until the expiration of their respective terms of office
and until their successors have been elected and qualified.
13. Further Assurances. From time to time, as and when required by the
------------------
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of the Transitory Subsidiary such deeds and other
instruments, and
-4-
<PAGE>
there shall be taken or caused to be taken by it such further and other action,
as shall be appropriate or necessary in order to vest or perfect in or to
confirm of record or otherwise in the Surviving Corporation the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of the Transitory Subsidiary, and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of the Transitory Subsidiary are fully authorized in the name and on
behalf of the Transitory Subsidiary or otherwise to take any and all such action
and to execute and deliver any and all such deeds and other instruments.
14. Abandonment. At any time prior to the Effective Time, this Agreement
-----------
may be terminated and the Merger may be abandoned by the Board of Directors of
any of the parties hereto, notwithstanding approval of this Agreement by the
stockholders of any of the parties hereto.
15. Amendment. This Agreement may be amended by the Boards of Directors
---------
of the parties hereto at any time prior to the Effective Time, provided that an
amendment made subsequent to the approval of this Agreement by the stockholders
of any of the parties hereto shall not (i) alter or change the amount or kind of
shares, securities, cash, property and/or rights to be received in exchange for
or on conversion of all or any of the shares of any class or series thereof of
such corporation, (ii) alter or change any term of the Articles of Organization
of the Surviving Corporation to be effected by the Merger or (iii) alter or
change any of the terms and conditions of this Agreement if such alteration or
change would adversely affect the holders of any class or series thereof of such
corporation.
16. Governing Law. This Agreement and the legal relations between the
-------------
parties shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized and its
corporate seal to be thereto affixed, all as of the date first above written.
LINKAGE, INC.,
a Massachusetts corporation
[corporate seal] By: _________________________________
President
By: _________________________________
Treasurer
LINKAGE SOLUTIONS, INC.,
a Delaware corporation
[corporate seal] By: _________________________________
President
By: _________________________________
Treasurer
LINKAGE TRANSITORY CORP.,
a Massachusetts corporation
[corporate seal] By: _________________________________
President
By: _________________________________
Treasurer
-6-
<PAGE>
Exhibit 2.2
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement (the "Agreement") is entered into as of the
---------
7th day of August, 1998 by and among Linkage, Inc., a Massachusetts corporation
with its principal office at One Forbes Road, Lexington, Massachusetts 02173
(the "Buyer"), High, Maley & Milhorn, Inc., a Texas corporation doing business
-----
as "High Technologies" with its principal office at 4100 Spring Valley Road,
Suite 720, Dallas, Texas 75244 (the "Company"), and Richard L. High, Susanne W.
-------
High, Terry L. Maley and Randall C. Milhorn (collectively, the "Stockholders").
------------
Preliminary Statement
---------------------
1. The Stockholders collectively own all of the outstanding shares (the
"Shares") of the capital stock of the Company as set forth on Schedule I hereto.
- ------- ----------
2. The Buyer desires to purchase, and the Stockholders desire to sell,
the Shares at the Closing (as defined below), for the consideration set forth
below, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:
1. Purchase and Sale of the Shares
-------------------------------
1.1 Purchase of the Shares from the Stockholders. Subject to and
--------------------------------------------
upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the "Closing"), the Stockholders
-------
shall sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
shall purchase, acquire and accept from the Stockholders, all the Shares owned
by the Stockholders. At the Closing, each Stockholder shall deliver to the
Buyer certificates evidencing the Shares owned by such Stockholder duly endorsed
in blank or with stock powers duly executed by the Stockholder.
1.2 Further Assurances. At any time and from time to time after the
------------------
Closing, at the Buyer's request and without further consideration, each of the
Stockholders shall promptly execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take all such other
action or actions as the Buyer may reasonably request, more effectively to
transfer, convey and assign to the Buyer, and to confirm the Buyer's title to,
all of the Shares, to put the Buyer in actual
<PAGE>
possession and operating control of the assets, properties and business of the
Company, and to carry out the purpose and intent of this Agreement.
1.3 Consideration for the Shares
----------------------------
(a) The aggregate purchase price (the "Purchase Price") to be paid
--------------
and delivered by the Buyer to the Stockholders for the Shares shall consist of
(i) $500,000 in cash (the "Initial Cash Payment"), payable by cashiers or
--------------------
certified check, (ii) the further consideration determined in accordance with
the provisions of Subsection 1.3(b) (the "Further Consideration"), and (iii) the
---------------------
contingent consideration, if any, payable in accordance with the provisions of
Subsection 1.3(c) (the "Contingent Consideration"). The Purchase Price shall be
------------------------
subject to adjustment following the Closing as set forth in Subsection 1.4. The
Initial Cash Payment shall be paid and delivered by the Buyer on the date of the
Closing (the "Closing Date") to the Stockholders in the respective proportions
------------
set forth opposite each Stockholder's name on Schedule I hereto (the
----------
"Stockholder Proportions").
- ------------------------
(b) On or before the date that is 60 days after the closing of the
Buyer's initial underwritten public offering (the "IPO") of shares of Common
---
Stock, no par value per share (the "Buyer Common Stock"), of the Buyer pursuant
------------------
to an effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), the Buyer shall issue to the Stockholders in the
--------------
Stockholder Proportions an aggregate number of shares of Buyer Common Stock that
is equal to the quotient obtained by dividing (x) $250,000 by (y) the Per Share
Price to the Public listed on the front cover of the Final Prospectus for the
IPO. Notwithstanding the foregoing, and unless otherwise agreed to in writing
by the parties hereto, in the event that the IPO does not close on or before the
second anniversary of the Closing Date, the Buyer shall pay and deliver to the
Stockholders in the Stockholder Proportions an aggregate of $250,000 in cash,
payable by cashiers or certified check, in lieu of any shares of Buyer Common
Stock pursuant to this Subsection 1.3(b).
(c) The Stockholders shall be entitled to receive up to three payments
of Contingent Consideration (the First Contingent Payment, the Second Contingent
Payment and the Third Contingent Payment) which shall be calculated as follows:
(i) In the event that the Qualifying EBIT (as defined below) for the
period from and including July 1, 1998 through and including December 31, 1998
is greater than or equal to $75,000, then the Buyer shall pay and deliver to the
Stockholders in the Stockholder Proportions within 15 days of the Buyer's
receipt of the final audit report with respect to such period from the Buyer's
Auditors (as defined below), but in any event no later than May 15, 1999, an
aggregate of $35,000 in cash, payable by cashiers or certified check (the "First
-----
Contingent Payment"). The Stockholders shall not be entitled to any First
- ------------------
Contingent Payment if the Qualifying EBIT
-2-
<PAGE>
for the period from and including July 1, 1998 through and including December
31, 1998 is less than $75,000.
(ii) In the event that the Qualifying EBIT for the period from and
including January 1, 1999 through and including December 31, 1999 is greater
than or equal to $200,000, then the Buyer shall pay and deliver to the
Stockholders in the Stockholder Proportions within 15 days of the Buyer's
receipt of the final audit report with respect to such period from the Buyer's
Auditors, but in any event no later than May 15, 2000, an aggregate of $95,000
in cash, payable by cashiers or certified check (the "Second Contingent
-----------------
Payment"). The Stockholders shall not be entitled to any Second Contingent
Payment if the Qualifying EBIT for the period from and including January 1, 1999
through and including December 31, 1999 is less than $200,000.
(iii) In the event that the Qualifying EBIT for the period from and
including January 1, 2000 through and including December 31, 2000 is greater
than or equal to $260,000, then the Buyer shall pay and deliver to the
Stockholders in the Stockholder Proportions within 15 days of the Buyer's
receipt of the final audit report with respect to such period from the Buyer's
Auditors, but in any event no later than May 15, 2001, an aggregate of $120,000
in cash, payable by cashiers or certified check (the "Third Contingent
----------------
Payment"). The Stockholders shall not be entitled to any Third Contingent
- -------
Payment if the Qualifying EBIT for the period from and including January 1, 2000
through and including December 31, 2000 is less than $260,000.
For the purposes of this Subsection 1.3(c), "Qualifying EBIT" shall mean
---------------
all earnings before interest and taxes of the Company, as determined by the
Buyer's Auditors (as defined below) in accordance with generally accepted
accounting principles ("GAAP") and as set forth below. For each of the fiscal
----
years ending December 31, 1998, 1999 and 2000, the Buyer shall prepare a
separate income statement for the Company. Each such income statement shall
include all revenues earned by the Company during the period covered thereby,
including but not limited to revenues directly related to courseware, manuals,
license agreement fees, and education and consulting services provided by the
Company, and all expenses directly related to the Company, provided that general
overhead, administrative costs and amortization shall not be included. In the
event that the Buyer sells all or substantially all of the business assets of
the Company prior to January 1, 2001, and the purchaser of such assets does not
agree in connection with such acquisition to assume all of the obligations of
the Buyer pursuant to this Section 1.3, then all Qualifying EBIT calculations
for the remaining term through December 31, 2000 shall be deemed satisfied in
full and the Stockholders shall be entitled to receive the Contingent
Consideration accordingly.
1.4 Net Worth Adjustment. The Purchase Price shall be subject to
--------------------
adjustment after the Closing Date as follows:
-3-
<PAGE>
(a) Not later than 90 days after the Closing Date, the Buyer (i) shall
prepare a balance sheet of the Company as of the Closing Date (as corrected
pursuant to this Subsection 1.4, the "Closing Balance Sheet"), (ii) may, at its
---------------------
option, cause Deloitte & Touche LLP, the Buyer's independent public accountants
(the "Buyer's Auditors"), to conduct an audit of the Closing Balance Sheet and
----------------
deliver an audit report without qualification thereon, and (iii) shall deliver
the Closing Balance Sheet to the Stockholders' Representative (as defined
below). The Closing Balance Sheet shall be prepared in accordance with GAAP,
applied consistently with the Company's past practices and methods (to the
extent applicable under GAAP), without any adjustments applicable solely as a
result of the acquisition of the Shares by the Buyer on the Closing Date. The
Stockholders shall work in good faith and cooperate with the Buyer and, if
applicable, the Buyer's Auditors in the preparation and, if applicable, audit of
the Closing Balance Sheet and the resolution of any dispute in connection
therewith pursuant to paragraph (c) below.
(b) The Stockholders' Representative and one firm of independent
certified public accountants acting on behalf of the Stockholders and the
Stockholders' Representative (the "Stockholders' Advisors") shall have the right
----------------------
to review the work papers of the Buyer and, if applicable, the Buyer's Auditors
utilized in auditing the Closing Balance Sheet, and shall have full access to
the books, records, properties and personnel of the Company (and Buyer's
personnel participating in any audit) for the sole purpose of verifying the
accuracy and fairness of the presentation of the Closing Balance Sheet.
(c) The values or amounts for each item reflected on the Closing
Balance Sheet shall be binding upon the Stockholders and the Stockholders'
Representative, unless the Stockholders' Representative gives written notice
within 30 calendar days after receipt of the Closing Balance Sheet of
disagreement with any of the values or amounts shown on the Closing Balance
Sheet, specifying, as to each such item in reasonable detail, the nature and
extent of such disagreement (the "Dispute Notice"). If the Buyer and the
--------------
Stockholders' Representative are unable to resolve any such disagreement within
30 days after the receipt by the Buyer of the Dispute Notice, the disagreement
shall be submitted to arbitration in accordance with the provisions of
Subsection 7.3 hereof. If as a result of the resolution of any disputes by
agreement pursuant to this Subsection 1.4 or by arbitration pursuant to
Subsection 7.3, any amount shown on the Closing Balance Sheet is determined to
be erroneous, such erroneous amount shall be deleted from the Closing Balance
Sheet and the correct amount shall be inserted in lieu thereof. The Closing
Balance Sheet, if and as so corrected, shall constitute the Closing Balance
Sheet for purposes of this Agreement.
(d) The Buyer shall pay the fees and disbursements of the Buyer's
Auditors. The fees and disbursements of the Stockholders' Advisors incurred in
the review of the Closing Balance Sheet shall be paid by the Stockholders in the
Stockholder Proportions. The Buyer shall under no circumstances be liable for
any fees or
-4-
<PAGE>
disbursements of the Stockholders' Advisors nor shall the Stockholders be
responsible for the fees or disbursements of the Buyer's Auditors.
(e) Immediately upon the expiration of the 30 calendar-day period
following the Stockholders' Representative's receipt of the Closing Balance
Sheet, if no Dispute Notice is given by the end of such period, or immediately
upon the resolution of disputes, if any, pursuant to this Subsection 1.4, the
Purchase Price shall be adjusted as follows, based upon the Closing Balance
Sheet (as so adjusted, the "Adjusted Purchase Price"):
-----------------------
(i) If the net worth (defined as depreciated book value of all assets,
including patents, trademarks and other similar intangible items less total
liabilities) of the Company as shown on the Closing Balance Sheet is less than
One Hundred Thousand dollars ($100,000), the deficiency shall be promptly paid
by cashiers or certified check by the Stockholders to the Buyer, with such
payment to be effected on a pro rata basis according to the Stockholder
Proportions. The Buyer shall have the right, in its sole discretion, to set off
any or all of such deficiency against the Further Consideration and/or any
Contingent Consideration payable pursuant to this Agreement.
(ii) If the net worth of the Company as shown on the Closing Balance
Sheet is greater than One Hundred Ten Thousand dollars ($110,000), the excess
shall be promptly paid by cashiers or certified check by the Buyer to the
Stockholders, with such payment to be effected on a pro rata basis according to
the Stockholder Proportions.
(iii) If the net worth of the Company as shown on the Closing Balance
Sheet is equal to or greater than One Hundred Thousand dollars ($100,000) but
less than or equal to One Hundred Ten Thousand dollars ($110,000), there shall
be no adjustment to the Purchase Price pursuant to this Section 1.4.
1.5 Stockholders' Representative
----------------------------
(a) In order to administer efficiently (i) the determination of the
Adjusted Purchase Price, (ii) the waiver of any condition to the obligations of
the Stockholders to consummate the transactions contemplated hereby, and (iii)
the defense and/or settlement of any claims for which the Stockholders may be
required to indemnify the Buyer or the Company pursuant to Section 5 hereof, the
Stockholders hereby designate Richard L. High as their representative (the
"Stockholders' Representative").
- -----------------------------
(b) The Stockholders hereby authorize the Stockholders' Representative
(i) to make all decisions and take all action relating to the determination of
the Adjusted Purchase Price, (ii) to make all decisions and take all action
necessary
-5-
<PAGE>
in connection with the waiver of any condition to the obligations of the
Stockholders to consummate the transactions contemplated hereby, or the defense
and/or settlement of any claims for which the Stockholders may be required to
indemnify the Buyer or the Company pursuant to Section 5 hereof, (iii) to give
and receive all notices required to be given under this Agreement, and (iv) to
take any and all additional action as is contemplated to be taken by or on
behalf of the Stockholders by the terms of this Agreement.
(c) In the event that the Stockholders' Representative dies, becomes
unable to perform his responsibilities hereunder or resigns from such position,
the Stockholders holding, prior to the Closing, a majority of the Shares set
forth on Schedule I attached hereto shall select another representative to fill
----------
such vacancy and such substituted representative shall be deemed to be the
Stockholders' Representative for all purposes of this Agreement.
(d) All decisions and actions by the Stockholders' Representative,
including, without limitation, any agreement between the Stockholders'
Representative and the Buyer relating to the determination of the Adjusted
Purchase Price, or the defense or settlement of any claims for which the
Stockholders may be required to indemnify the Buyer and/or the Company pursuant
to Section 5 hereof, shall be binding upon all of the Stockholders, and no
Stockholder shall have the right to object, dissent, protest or otherwise
contest the same.
(e) By their execution of this Agreement, the Stockholders agree
that:
(i) the Buyer shall be able to rely conclusively on the instructions
and decisions of the Stockholders' Representative as to the determination of the
Adjusted Purchase Price, the settlement of any claims for indemnification by the
Buyer or the Company pursuant to Section 5 hereof or any other actions required
to be taken by the Stockholders' Representative hereunder, and no party
hereunder shall have any cause of action against the Buyer for any action taken
by the Buyer in reliance upon the instructions or decisions of the Stockholders'
Representative;
(ii) all actions, decisions and instructions of the Stockholders'
Representative shall be conclusive and binding upon all of the Stockholders and
no Stockholder shall have any cause of action against the Stockholders'
Representative for any action taken, decision made or instruction given by the
Stockholders' Representative under this Agreement, except for fraud or willful
breach of this Agreement by the Stockholders' Representative;
(iii) the provisions of this Subsection 1.5 are independent and
severable, are irrevocable and coupled with an interest and shall be enforceable
-6-
<PAGE>
notwithstanding any rights or remedies that any Stockholder may have in
connection with the transactions contemplated by this Agreement;
(iv) remedies available at law for any breach of the provisions of
this Subsection 1.5 are inadequate; therefore, the Buyer, the Company and the
Stockholders' Representative shall be entitled to temporary and permanent
injunctive relief without the necessity of proving damages if either the Buyer,
the Company or the Stockholders' Representative brings an action to enforce the
provisions of this Subsection 1.5; and
(v) the provisions of this Subsection 1.5 shall be binding upon the
executors, heirs, legal representatives and successors of each Stockholder, and
any references in this Agreement to a Stockholder or the Stockholders shall mean
and include the successors to the Stockholders' rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
(f) All fees and expenses incurred by the Stockholders' Representative
in connection with this Agreement shall be paid by the Stockholders on a pro
rata basis according to the Stockholder Proportions.
1.6 Closing. The Closing shall take place at the offices of Hale and
-------
Dorr LLP, 60 State Street, Boston, Massachusetts 02109 at 9:00 a.m., Eastern
Time, on the date of this Agreement or at such other place, time or date as may
be mutually agreed upon in writing by the parties. The transfer of the Shares
by the Stockholders to the Buyer shall be deemed to occur at 9:00 a.m., Eastern
Time, on the Closing Date.
2. Representations of the Stockholders
-----------------------------------
Each of the Stockholders severally represents and warrants to the
Buyer as follows:
2.1 Ownership of Stock, Authority.
-----------------------------
(a) He or she has good and marketable title to the Shares which are to
be transferred to the Buyer by such Stockholder pursuant hereto, free and clear
of any and all covenants, conditions, restrictions, voting trust arrangements,
liens, charges, encumbrances, options, voting trusts, voting agreements, and
adverse claims or rights whatsoever ("Stock Claims"). Schedule I attached
------------ ----------
hereto sets forth a true and correct description of all Shares owned by such
Stockholder.
(b) He or she has all requisite right, power and authority to execute
and deliver this Agreement, to perform his or her obligations hereunder and to
transfer, convey and sell to the Buyer at the Closing the Shares to be sold by
such
-7-
<PAGE>
Stockholder hereunder and, upon consummation of the purchase contemplated
hereby, the Buyer will acquire good and marketable title to such Shares, free
and clear of all Stock Claims.
(c) The execution, delivery and performance of this Agreement by him
or her and the transfer, conveyance and sale of the Shares to be sold by such
Stockholder to the Buyer pursuant to the terms hereof shall not conflict with,
result in a breach of or constitute a default under any agreement to which he or
she is a party or by which it is bound or any judgment, order, writ, injunction
or decree of any court or other governmental body.
(d) No broker or finder has acted for him or her in connection with
this Agreement or the transactions contemplated hereby, and no broker or finder
is entitled to any brokerage or finder's fee or other commissions in respect of
such transactions based upon agreements, arrangements or understandings made by
or on behalf of him or her.
(e) The execution, delivery and performance of this Agreement by him
or her and the transfer, conveyance and sale of the Shares to be sold by such
Stockholder to the Buyer pursuant to the terms hereof are each actions of his or
her own free will and are not products of duress of any kind.
2.2 Investment Representations. To the extent that shares of Buyer
--------------------------
Common Stock are issued to the Stockholders pursuant to Subsection 1.3(b) (the
"Buyer Shares"):
- -------------
(a) He or she will be acquiring the Buyer Shares to be issued to him
or her for his or her own account for investment only, and not with a view to,
or for sale in connection with, any distribution of such Buyer Shares in
violation of the Securities Act or any rule or regulation under the Securities
Act.
(b) He or she has had adequate opportunity to obtain from
representatives of the Buyer such information, in addition to the
representations set forth in this Agreement, as is necessary to evaluate the
merits and risks of his or her investment in the Buyer.
(c) He or she has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the acquisition
of the Buyer Shares which may be issued to him or her and to make an informed
investment decision with respect to such investment.
(d) He or she can afford a complete loss of the value of the Buyer
Shares and is able to bear the economic risk of holding such Buyer Shares for an
indefinite period.
-8-
<PAGE>
(e) He or she understands that the Buyer Shares, if and when issued,
will not have been registered under the Securities Act and will be "restricted
securities" within the meaning of Rule 144 under the Securities Act; and the
Buyer Shares will not be eligible to be sold, transferred or otherwise disposed
of unless they are subsequently registered under the Securities Act or an
exemption from registration is then available.
(f) A legend substantially in the following form will be placed on the
certificate representing any Buyer Shares which may be issued to him or her:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel satisfactory
to the corporation to the effect that such registration is not required."
2.3 Understanding as to IPO. He or she understands and agrees that
-----------------------
the Buyer is under no obligation to the Stockholders or any third party by this
Agreement, or otherwise, to undertake, commence or close an IPO on or before the
second anniversary of the Closing Date, or at all.
3. Representations of the Stockholders and the Company Regarding the
-----------------------------------------------------------------
Company
-------
The Company and each of the Stockholders jointly and severally
represent and warrant to the Buyer that the statements contained in this Section
3 are true and correct, except as set forth in the disclosure schedule provided
to the Buyer on the date hereof and forming a part hereof (the "Disclosure
----------
Schedule"). The Disclosure Schedule shall be initialed by each of the
- --------
Stockholders and shall be arranged in paragraphs corresponding to the numbered
and lettered paragraphs contained in this Section 3, and the disclosures in any
paragraph of the Disclosure Schedule shall qualify only the corresponding
paragraph in this Section 3.
3.1 Organization, Qualification and Corporate Power. The Company is
-----------------------------------------------
a corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the state of its incorporation. The Company is duly
qualified to conduct business and is in corporate and franchise tax good
standing under the laws of each jurisdiction in which the nature of its business
or the ownership or leasing of its properties requires such qualification. The
Company has all requisite power and authority (corporate and other) to carry on
the business in which it is engaged and to own and use the properties owned and
used by it. The Company has delivered to the Buyer true and complete copies of
its charter and by-laws, each as amended and/or
-9-
<PAGE>
restated to date and as in effect on the date hereof. The Company is not in
default under or in violation of any provision of its charter or by-laws.
3.2 Capitalization. The authorized capital stock of the Company
--------------
consists of 2,000,000 shares of stock described as follows: 1,000,000 shares of
authorized Class A Voting Common Stock, $.10 par value per share; and 1,000,000
shares of authorized Class B Non-Voting Common Stock, no par value per share.
The Company has 143,350 shares of Class A Voting Common Stock issued and
outstanding on the date hereof and held of record and beneficially by the
Stockholders, as set forth on Schedule I attached hereto. No shares of Class B
----------
Voting Common Stock are issued or outstanding. All of the issued and
outstanding Shares are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. There are no outstanding or
authorized options, warrants, rights, agreements or commitments to which the
Company is a party or which are binding upon the Company providing for the
issuance, disposition or acquisition of any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company. There are no agreements, voting trusts, or proxies
or understandings with respect to the voting, or registration under the
Securities Act of any Shares. All of the issued and outstanding Shares were
offered and issued in compliance with applicable federal and state securities
laws.
3.3 Authority. The Company has all requisite right, power and
---------
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly and validly executed and delivered by the
Company and the Stockholders and constitutes a valid and binding obligation of
the Company and the Stockholders, enforceable against the Company and the
Stockholders in accordance with its terms.
3.4 Noncontravention. Neither the execution and delivery of this
----------------
Agreement or the other agreements contemplated hereby by the Company and the
Stockholders, nor the consummation by the Company and the Stockholders of the
transactions contemplated hereby and thereby, will (a) conflict with or violate
any provision of the charter or by-laws of the Company; (b) require on the part
of the Company any filing with, or any permit, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"); (c) conflict with, result in a breach of, constitute
- --------------------
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest (as
defined below) or
-10-
<PAGE>
other arrangement to which the Company is a party or by which the Company is
bound or to which any of the assets of the Company or the Shares are subject;
(d) result in the imposition of any Security Interest upon any assets of the
Company; or (e) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of the properties or assets of the
Company or the Shares. For purposes of this Agreement, "Security Interest" means
-----------------
any mortgage, pledge, security interest, encumbrance, charge, or other lien
(whether arising by contract or by operation of law), other than (i) mechanic's,
materialmen's and similar liens; (ii) liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good faith through appropriate
proceedings; (iii) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; (iv) liens on
goods in transit incurred pursuant to documentary letters of credit; (v)
purchase money liens and liens securing rental payments under capital lease
arrangements; and (vi) other liens arising in the ordinary course of business
consistent with past custom and practice (including with respect to frequency
and amount) of the Company ("Ordinary Course of Business").
---------------------------
3.5 Subsidiaries. The Company does not own or control, directly or
------------
indirectly, any shares of capital stock of any corporation or have any equity
interest in any partnership, joint venture, trust, association or other non-
corporate business enterprise.
3.6 Financial Statements. The Company has previously provided to the
--------------------
Buyer complete and accurate copies of its unaudited balance sheets and related
statements of income, stockholders' equity, retained earnings and cash flows as
of and for each of the fiscal years ended December 31, 1996 and 1997 and the six
months ended June 30, 1998. The foregoing financial statements (the "Financial
---------
Statements") have been prepared in accordance with GAAP applied on a consistent
- ----------
basis throughout the periods covered thereby, fairly present the financial
condition, results of operations and cash flows of the Company as of the
respective dates thereof and for the periods referred to therein and are
consistent with the books and records of the Company.
3.7 Absence of Certain Changes. Since June 30, 1998, (a) there has
--------------------------
not been any material adverse change in the assets, business, financial
condition, results of operations or future prospects of the Company nor has
there occurred any event or development which could reasonably be foreseen to
result in such a material adverse change in the future, and (b) the Company has
not taken any of the actions set forth below:
(a) issued, sold, delivered or agreed or committed to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) or authorized the
issuance, sale or delivery of, or redeemed or repurchased, any stock of any
class or any other securities or any rights, warrants or options to acquire any
such stock or other securities;
-11-
<PAGE>
(b) split, combined or reclassified any shares of its capital stock;
or declared, set aside or paid any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock;
(c) created, incurred or assumed any debt not currently outstanding
(including obligations in respect of capital leases); assumed, guaranteed,
endorsed or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; or made any
loans, advances or capital contributions to, or investments in, any other person
or entity;
(d) entered into, adopted or amended any employee benefit plan or any
employment or severance agreement or arrangement of the type described in
Section 3.20 or (except for normal increases in the Ordinary Course of Business)
increased in any manner the compensation or fringe benefits of, or materially
modified the employment terms of, its directors, officers or employees,
generally or individually, or paid any benefit not required by the terms in
effect on the date hereof of any existing employee benefit plan;
(e) acquired, sold, leased, encumbered or disposed of any assets,
other than purchases of assets and sales of products in the Ordinary Course of
Business;
(f) amended its charter or by-laws;
(g) changed its accounting methods, principles or practices, except
insofar as may be required by GAAP;
(h) discharged or satisfied any Security Interest or paid any
obligation or liability other than in the Ordinary Course of Business;
(i) mortgaged or pledged any of its property or assets or subjected
any such assets to any Security Interest;
(j) sold, assigned, transferred or licensed any Intellectual Property
(as defined below), other than in the Ordinary Course of Business;
(k) entered into, amended, terminated, took or intentionally omitted
to take any action that would constitute a violation of or default under, or
waived any rights under, any contract or agreement other than in the Ordinary
Course of Business; or
(l) made or committed to make any capital expenditure in excess of
$5,000 per item or $25,000 in the aggregate.
-12-
<PAGE>
3.8 Undisclosed Liabilities. The Company has no liability (whether
-----------------------
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities shown
on the balance sheet dated June 30, 1998 (the "Most Recent Balance Sheet"), (b)
-------------------------
liabilities which have arisen since the date of the Most Recent Balance Sheet in
the Ordinary Course of Business and that are similar in nature and amount to the
liabilities that arose during the comparable period of time in the immediately
preceding fiscal period, (c) any liabilities arising out of the matter disclosed
in Section 3.17 of the Disclosure Schedule, and (d) contractual liabilities
incurred in the Ordinary Course of Business which are not required by GAAP to be
reflected on the Most Recent Balance Sheet and which are not in the aggregate
material.
3.9 Tax Matters.
-----------
(a) The Company has filed all Tax Returns (as defined below) that it
was required to file and all such Tax Returns were correct and complete. The
Company has paid all Taxes (as defined below) imposed on it, or for which it is
liable, whether to Governmental Entities (as, for example, under law) or to
other persons or entities (as, for example, under a tax allocation agreement),
due on or before the date hereof except for such Taxes that the Company is
contesting in good faith and which are fully reserved for on the Most Recent
Balance Sheet. The unpaid Taxes of the Company for Tax periods through the
date of the Most Recent Balance Sheet do not exceed the accruals and reserves
for Taxes set forth on the Most Recent Balance Sheet or to be set forth on the
Closing Balance Sheet. The Company has no actual or potential liability for any
Tax obligation of any taxpayer other than the Company. All Taxes that the
Company is or was required by law to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
Governmental Entity or will be reserved on the Closing Balance Sheet. For
purposes of this Agreement, "Taxes" means all taxes, charges, fees, levies or
-----
other similar assessments or liabilities, including without limitation income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment, payroll and
franchise taxes imposed by the United States of America or any state, local or
foreign government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof. For purposes of this
Agreement, "Tax Returns" means all reports, returns, declarations, statements or
-----------
other information required to be supplied to a taxing authority in connection
with Taxes.
(b) The Company has delivered to the Buyer correct and complete copies
of all Tax Returns, examination reports and statements of deficiencies assessed
against or agreed to by the Company since January 1, 1994. None of the Tax
Returns of the Company has ever been audited by any taxing authority or other
Governmental Entity. No examination or audit of any Tax Returns of the Company
by any
-13-
<PAGE>
Governmental Entity is currently in progress or, to the Company's knowledge,
threatened or contemplated.
(c) The Company has not waived any statute of limitations with respect
to Taxes or agreed to an extension of time with respect to a Tax assessment or
deficiency.
(d) The Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
----
and none of the assets of the Company is subject to an election under Section
341(f) of the Code. The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code. The
Company is not a party to any Tax allocation or sharing agreement.
(e) The Company is not and has never been a member of an "affiliated
group" of corporations (within the meaning of Section 1504 of the Code).
(f) None of the assets of the Company is "tax exempt use property"
within the meaning of Section 168(h) of the Code. The Company has not agreed to
make, nor is required to make, any adjustments under Section 481(a) of the Code
by reason of a change in accounting method or otherwise.
(g) The Company has not made an election at any time under Section
1362 of the Code to be treated as an "S corporation" as defined in Section
1361(a) of the Code.
3.10 Tangible Assets. The Company owns or leases all tangible assets
---------------
necessary for the conduct of its business as presently conducted. Each such
tangible asset is free from defects, has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used. No asset of the Company (tangible or intangible) is subject to any
Security Interest.
3.11 Owned Real Property. The Company owns no real property.
-------------------
3.12 Intellectual Property.
---------------------
(a) The Company owns or has the right to use all Intellectual Property
(as defined below) used in the operation of its business or necessary for the
operation of its business as currently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned by, or used in the
operation of, the business of the Company will be owned or available for use by
the Company on identical terms and conditions immediately following the Closing.
The Company has
-14-
<PAGE>
taken all reasonable measures to protect the proprietary nature of each item of
Intellectual Property, and to maintain in confidence all trade secrets and
confidential information that it owns or uses. Except with respect to non-
exclusive licenses provided in the ordinary course of business, no other person
or entity has any rights to any of the Intellectual Property owned or used by
the Company, and, to the Company's knowledge, no other person or entity is
infringing, violating or misappropriating any of the Intellectual Property that
the Company owns or uses. For purposes of this Agreement, "Intellectual
------------
Property" means all (i) Courseware (as defined below); (ii) patents, patent
- --------
applications, patent disclosures and all related continuation, continuation-in-
part, divisional, reissue, reexamination, utility, model, certificate of
invention and design patents, patent applications, registrations and
applications for registrations, including, without limitation, with respect to
the Courseware; (iii) trademarks, service marks, trade dress, logos, trade names
and corporate names and registrations and applications for registration thereof,
including, without limitation, with respect to the Courseware; (iv) copyrights
and registrations and applications for registration thereof, including, without
limitation, with respect to the Courseware; (v) computer software, data and
documentation; (vi) trade secrets, whether patentable or unpatentable and
whether or not reduced to practice, know-how, research and development
information and copyrightable works; (vii) financial, marketing and business
data and information, pricing and cost information, business and marketing plans
and customer and supplier lists and information; (viii) other proprietary rights
relating to any of the foregoing; and (ix) copies and tangible embodiments
thereof. For purposes of this Agreement, "Courseware" shall mean all educational
----------
or instructional materials, tools and aids that (i) the Company possesses,
regardless of the form in which they are reduced including without limitation
hard copy, software and electronic formats, (ii) are referenced in the Company's
course listing attached hereto as Exhibit A, and (iii) are under development by
---------
or on behalf of the Company.
(b) None of the activities or business presently conducted by the
Company, or conducted by the Company at any time within the six years prior to
the date of this Agreement, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any other person or
entity. The Company has not received any complaint, claim or notice alleging
any such infringement, violation or misappropriation.
(c) Section 3.12(c) of the Disclosure Schedule identifies each item of
Intellectual Property owned by the Company, identifies each pending application
for registration of Intellectual Property which the Company has made, and
identifies each license or other agreement pursuant to which the Company has
granted any rights to any third party with respect to any of its Intellectual
Property, excluding the grant of licenses to customers in the Ordinary Course of
Business. The Company has delivered to the Buyer a correct and complete list of
all such Intellectual Property, registrations, applications, licenses and
agreements (each as amended to date) and has made available to the Buyer correct
and complete copies of all other written documentation evidencing
-15-
<PAGE>
ownership of, and any claims or disputes relating to, each such item. Except for
grants of licenses to customers in the Ordinary Course of Business, with respect
to each item of Intellectual Property that the Company owns:
(i) the Company possesses all right, title and interest in and to such
item;
(ii) such item is not subject to any outstanding judgment, order,
decree, stipulation or injunction; and
(iii) the Company has not agreed to indemnify any person or entity for
or against any infringement, misappropriation or other conflict with respect to
such item.
(d) Except for commercially available software subject to standard
"shrinkwrap" licenses and software in the "public domain," Section 3.12(d) of
the Disclosure Schedule identifies each item of Intellectual Property used in
the operation of the business of the Company that is owned by a party other than
the Company. The Company has supplied the Buyer with correct and complete
copies of all licenses, sublicenses or other agreements (as amended to date)
pursuant to which the Company uses such Intellectual Property. With respect to
each such item of Intellectual Property:
(i) the license, sublicense or other agreement covering such item is
legal, valid, binding, enforceable and in full force and effect;
(ii) such license, sublicense or other agreement will continue to be
legal, valid, binding, enforceable and in full force and effect following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
(iii) neither the Company nor, to the Company's knowledge, any other
party to such license, sublicense or other agreement is in breach or default,
and no event has occurred which with notice or lapse of time or both would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iv) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation or injunction; and
(v) the Company has not agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation or other conflict
with respect to such item.
(e) Except for commercially available software subject to standard
"shrinkwrap" licenses and software in the "public domain," Section 3.12(e) of
the Disclosure Schedule lists each item of Intellectual Property in which the
Company has
-16-
<PAGE>
any interest and which is not listed elsewhere in Section 3.12 of the Disclosure
Schedule, including but not limited to all software programs and related
documentation, unregistered trademarks, trade names, service marks, logos and
trade dress.
3.13 Real Property Leases. Section 3.13 of the Disclosure Schedule
--------------------
lists and describes briefly all real property leased or subleased to the Company
and lists the term of such lease, any extension and expansion options, and the
rent payable thereunder. The Company has delivered to the Buyer correct and
complete copies of the leases and subleases (as amended to date) listed in
Section 3.13 of the Disclosure Schedule. With respect to each lease and
sublease listed in Section 3.13 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect;
(b) the lease or sublease will be legal, valid, binding, enforceable
and in full force and effect immediately following the Closing in accordance
with the terms thereof as in effect prior to the Closing;
(c) neither the Company nor, to the Company's knowledge, the other
party to the lease or sublease is in breach or default thereof, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default by the Company or permit termination, modification or acceleration by
the other party thereunder;
(d) there are no disputes, oral agreements or forbearance programs
between the Company and the other party to such lease or sublease in effect as
to the lease or sublease;
(e) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold; and
(f) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities as
presently conducted.
3.14 Contracts. Section 3.14 of the Disclosure Schedule lists the
---------
following agreements (whether written or oral) to which the Company is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property from or to third parties providing for lease payments in
excess of $5,000 per annum;
-17-
<PAGE>
(b) any agreement (or group of related agreements) for the purchase or
sale of supplies, products or other personal property or for the furnishing or
receipt of services (i) which calls for performance over a period of more than
one year, (ii) which involves more than the sum of $5,000 or (iii) in which the
Company has granted manufacturing rights, "most favored nation" pricing
provisions or marketing or distribution rights relating to any services,
products or territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively from a certain
party;
(c) any agreement (or group of related agreements) under which the
Company has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness (including capitalized lease obligations) or
under which it has imposed (or may impose) a Security Interest on any of its
assets, tangible or intangible;
(d) any consulting agreement;
(e) any agreement relating to the design, development or license of
Courseware;
(f) any agreement concerning confidentiality or noncompetition;
(g) any agreement creating a partnership or joint venture;
(h) any agreement involving a Stockholder or his or her affiliates
("Affiliates"), as defined in Rule 12b-2 under the Securities Exchange Act of
- ------------
1934, as amended, that is not both terminated prior to the Closing and without
any force or effect after the Closing;
(i) any agreement under which the consequences of a default or
termination would reasonably be expected to have a material adverse effect on
the assets, business, financial condition, results of operations or future
prospects of the Company; and
(j) any other agreement (or group of related agreements) either
involving the receipt or payment of more than $10,000 or not entered into in the
Ordinary Course of Business.
The Company has made available to the Buyer a correct and complete
copy or summary of each agreement (as amended to date) listed in Section 3.14 of
the Disclosure Schedule. With respect to each agreement so listed: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect;
(ii) the agreement will be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the
-18-
<PAGE>
Closing; and (iii) neither the Company nor, to the Company's knowledge, any
other party is in breach or default thereof, and no event has occurred which
with notice or lapse of time would constitute a breach or default by the Company
or permit termination, modification, or acceleration by the other party, under
the agreement.
3.15 Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of the Company.
3.16 Insurance. Section 3.16 of the Disclosure Schedule sets forth a
---------
list of each insurance policy (including fire, theft, casualty, general
liability, workers compensation, business interruption, environmental, product
liability and automobile insurance policies and bond and surety arrangements) to
which the Company has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past five years. Copies of all
such policies have been delivered to the Buyer. The Company and the
Stockholders further represent that: (i) each such insurance policy is
enforceable and in full force and effect; (ii) such policy will continue to be
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing; (iii) the
Company is not in breach or default (including with respect to the payment of
premiums or the giving of notices) under such policy, and no event has occurred
which, with notice or the lapse of time or both, would constitute such a breach
or default or permit termination, modification or acceleration, under such
policy; and (iv) the Company has not received any notice from the insurer
disclaiming coverage or reserving rights with respect to a particular claim or
such policy in general.
3.17 Litigation. Section 3.17 of the Disclosure Schedule identifies,
----------
and contains a brief description of, (a) any unsatisfied judgement, order,
decree, stipulation or injunction and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator to which the Company is a party or, to the Company's knowledge,
is threatened to be made a party. None of the complaints, actions, suits,
proceedings, hearings and investigations set forth in Section 3.17 of the
Disclosure Schedule, if resolved adversely to the Company, would be reasonably
expected to have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company.
3.18 Legal Compliance. The Company, and its conduct and operations of
----------------
its business, is in compliance with each law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, which (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to the Company or its
business.
-19-
<PAGE>
3.19 Employees, Consultants and Subcontractors.
-----------------------------------------
(a) Section 3.19(a) of the Disclosure Schedule sets forth a list of
(i) all employees of the Company, along with the position and the annual rate of
compensation (or, with respect to employees compensated on an hourly or per diem
basis, the hourly or per diem rate of compensation) and estimated or target
annual incentive compensation of each such employee, (ii) all employment
contracts or agreements relating to employment with the Company, and (iii) all
employees who have executed confidentiality, non-competition or non-solicitation
agreements. To the Company's knowledge, no key employee or group of employees
has any plans to terminate employment with the Company. The Company is not a
party to or bound by any collective bargaining agreement, and has not
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. The Company has no knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
(b) Section 3.19(b) of the Disclosure Schedule sets forth (i) a list
of all consultants to the Company currently providing consulting services or
under contract to provide future consulting services to the Company, and (ii)
the start date, type of consulting services provided or to be provided and
hourly or per diem pay rate of such consultants.
(c) Section 3.19(c) of the Disclosure Schedule sets forth (i) a list
of all subcontractors to the Company currently performing services or under
contract to provide future services for the Company, and (ii) the start date,
type of services provided or to be provided and hourly or per diem pay rate of
such subcontractors.
3.20 Employee Benefit Plans
----------------------
(a) Section 3.20 of the Disclosure Schedule sets forth an accurate
schedule of all employee benefit or welfare benefit plans or arrangements of the
Company, including without limitation any pension, profit sharing, bonus, stock
option, incentive, deferred compensation, hospitalization, medical, insurance or
other plan or arrangement, any employment agreement containing "golden
parachute" provisions, and a description of such plans and arrangements,
together with copies of such plans, agreements and any trusts relate thereto,
and classifications of employees covered thereby. All employee benefit plans
listed in Section 3.20 of the Disclosure Schedule are in compliance with any
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the regulations issued thereunder, as well as with all
-----
other applicable federal, state, local and foreign statutes, ordinances and
regulations.
(b) All plans listed in Section 3.20 of the Disclosure Schedule that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the Code
---------------
have
-20-
<PAGE>
been determined by the Internal Revenue Service to be so qualified, or will be
submitted to the Internal Revenue Service within the relevant amendment period
of Section 401(b) of the Code, and copies of such determination letters are
included as part of Section 3.20 of the Disclosure Schedule. All reports and
other documents required to be filed with any Governmental Entity or distributed
to plan participants or beneficiaries (including, but not limited to, actuarial
reports, audits and Tax Returns) have been timely filed or distributed, and true
copies thereof have been delivered to the Buyer. None of the Stockholders, any
such plan listed in Section 3.20 of the Disclosure Schedule or the Company has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such plan listed in Section 3.20 of the
Disclosure Schedule has incurred an accumulated funding deficiency, as defined
in Section 412(a) of the Code and Section 302(1) of ERISA. The Company has not
incurred any liability for excise tax or penalty due to the Internal Revenue
Service or any liability due to the Pension Benefit Guaranty Corporation. The
Company has never maintained a plan that is subject to Title IV of ERISA or
Section 412 of the Code. The Company has never been required to contribute to a
multiemployer plan as defined in Section 4001 of ERISA.
3.21 Environmental Matters. The Company has not disposed of, or
---------------------
contracted for the disposal of, hazardous wastes, hazardous substances,
infectious or medical waste, as those terms are defined by the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the Comprehensive
----
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any comparable state laws, rules or regulations. There has been
- --------
no storage or treatment of solid wastes or hazardous wastes (as defined in RCRA)
by the Company at any site or other facility owned or operated by the Company in
violation of any applicable law, rule, regulation, order, judgment or permit or
that would require any remedial action under any applicable law. Except as
disclosed in Section 3.21 of the Disclosure Schedule, (a) the Company has not
received any notice of any violation with respect to asbestos or other toxic or
dangerous materials at any of its sites, and (b) there has been no spill,
discharge, leak, emission, injection, escape, dumping or release of any kind by
the Company onto any property leased by Company, or into the environment
surrounding any such property of any toxic or hazardous substances as defined
under any local, state or federal regulations or laws. Except as disclosed in
Section 3.21 of the Disclosure Schedule, no employee of the Company has, in the
course and scope of his or her employment, been exposed by the Company in
violation of any law or regulation to hazardous, infectious or toxic wastes or
substances. In addition, none of the Company or the Stockholders has knowledge
of any assertion by any Governmental Entity of any enforcement action. Section
3.21 of the Disclosure Schedule sets forth a complete list of all disposal sites
utilized in the past five years by Company.
3.22 Permits. Section 3.22 of the Disclosure Schedule sets forth a
-------
list of all permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including without limitation those issued or
required under
-21-
<PAGE>
environmental laws and those relating to the occupancy or use of owned or leased
real property) ("Permits") issued to or held by the Company. Such listed Permits
-------
are the only Permits that are required for the Company to conduct its business
as presently conducted or as proposed to be conducted. Each such Permit is in
full force and effect and, to the Company's knowledge, no suspension or
cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration. Each such Permit will be
in full force and effect immediately following the Closing.
3.23 Certain Business Relationships With Affiliates. No Affiliate of
----------------------------------------------
the Company (a) owns any property or right, tangible or intangible, which is
used in the business of the Company, (b) has any claim or cause of action
against the Company, or (c) owes any money to the Company.
3.24 Brokers' Fees. The Company has no liability or obligation to
-------------
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.25 Books and Records. The minute books and other similar records of
-----------------
the Company contain true and complete records of all actions taken at any
meetings of the Company's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Company accurately reflect the assets,
liabilities, business, financial condition and results of operations of the
Company and have been maintained in accordance with good business and
bookkeeping practices.
3.26 Suppliers and Customers. Except as disclosed in Section 3.26 of
-----------------------
the Disclosure Schedule, no material supplier of the Company has indicated in
writing within the past year that it will stop, or decrease the rate of,
supplying materials, products or services to them and no material customer of
the Company has indicated in writing within the past year that it will stop, or
decrease the rate of, buying, leasing or licensing materials, products or
services from them. Section 3.26 of the Disclosure Schedule sets forth a list
of (a) each supplier that is a supplier of any significant product or component
to the Company, and (b) each customer that accounted for more than 1% of the
revenues of the Company during the last full fiscal year and the amount of
revenues accounted for by such customer during such period.
3.27 Disclosure. No representation or warranty by the Company and the
----------
Stockholders contained in this Agreement, and no statement contained in the
Disclosure Schedule or any other document, certificate or other instrument
delivered by or on behalf of the Company and the Stockholders pursuant to this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary, in light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
-22-
<PAGE>
4. Representations of the Buyer
----------------------------
The Buyer represents and warrants to the Company and the Stockholders
as follows:
4.1 Organization. The Buyer is a corporation duly organized, validly
------------
existing and in corporate and tax good standing under the laws of the
Commonwealth of Massachusetts, and has all requisite power and authority
(corporate and other) to own its properties and to carry on its business as now
being conducted. The Buyer is not in default under any provision of its charter
or by-laws.
4.2 Authority. The Buyer has all requisite right, power and
---------
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement and the
consummation by the Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer. This Agreement has been duly and validly executed and delivered by the
Buyer and constitutes a valid and binding obligation of the Buyer, enforceable
against it in accordance with its terms.
4.3 Noncontravention. Neither the execution and delivery of this
----------------
Agreement or the other agreements contemplated hereby by the Buyer, nor the
consummation by the Buyer of the transactions contemplated hereby or thereby,
will (a) conflict with or violate any provision of the charter or by-laws of the
Buyer; (b) require on the part of the Buyer any filing with, or permit,
authorization, consent or approval of, any Governmental Entity; (c) conflict
with, result in a breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in any
party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its assets
are subject; or (d) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Buyer or any of its properties or assets.
4.4 Broker's Fees. The Buyer has no liability or obligation to pay
-------------
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
4.5 No Assurance of IPO. The Buyer makes no representation or
-------------------
warranty that an IPO will occur on or before the second anniversary of the
Closing Date or at all.
-23-
<PAGE>
4.6 Disclosure. No representation or warranty by the Buyer contained
----------
in this Agreement, and no statement contained in any other document, certificate
or other instrument delivered by or on behalf of the Buyer pursuant to this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary, in light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
5. Indemnification
---------------
5.1 By the Stockholders.
-------------------
(a) Subject to the provisions and limitations in this Section 5,
including, without limitation, those in Subsection 5.6, the Stockholders hereby
jointly and severally indemnify and agree to hold harmless the Buyer and the
Company from and against any and all debts, obligations and other liabilities
(whether absolute, accrued, contingent, fixed or otherwise, or whether known or
unknown, or due or to become due or otherwise), monetary damages, fines, fees,
penalties, interest obligations, deficiencies, losses and expenses (including
without limitation amounts paid in settlement; interest; court costs; costs of
investigators; reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts; and other expenses of litigation) incurred or
suffered by the party seeking indemnification ("Damages"):
-------
(i) resulting from or relating to any breach of or failure to perform
any representation, warranty, covenant or agreement of the Company or the
Stockholders contained in this Agreement, with the exception of any
representation, warranty, covenant or agreement of the Stockholders contained in
Section 2; and
(ii) resulting from any claim by a stockholder or former stockholder
of the Company, or any other person, firm, corporation or entity, seeking to
assert, or based upon: (A) ownership or rights to ownership of any shares of
stock of the Company; (B) any rights of a stockholder, including any option,
dissenter's or preemptive rights or rights to notice or to vote; (C) any rights
under the charter or by-laws of the Company; or (D) any claim that his, her or
its shares were wrongfully repurchased by the Company; provided, however, that
this Subsection 5.1(a)(ii) shall not apply to any rights or claims of the Buyer
or any transferee of the Buyer of shares of stock of the Company after the
Closing Date arising solely from the Buyer's or any such transferee's status as
a stockholder of the Company or any claims of additional stockholders to the
Company whose claim to ownership in such stock arises after the Closing Date.
(b) Each of the Stockholders hereby severally indemnifies and agrees
to hold harmless the Buyer and the Company from and against all Damages
-24-
<PAGE>
resulting from any breach of the representations and warranties made by such
Stockholder in Section 2 of this Agreement.
5.2 Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification under this Section 5, the Buyer or the Company, as the case may
be, seeking indemnification (the "Indemnified Party"), shall promptly notify the
-----------------
Stockholders' Representative of the claim and, when known, the facts
constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Stockholders' Representative, who shall have the power and authority to bind all
of the Stockholders; provided, however, that if suit shall have been instituted
against the Indemnified Party and the Stockholders' Representative shall not
have taken control of such suit after notification thereof as provided in
Subsection 5.3 of this Agreement, the Indemnified Party shall have the right to
settle or compromise such claim upon giving notice to the Stockholders'
Representative as provided in Subsection 5.3.
5.3 Defense by the Stockholders. In connection with any claim which
---------------------------
may give rise to indemnity hereunder resulting from or arising out of any claim
or legal proceeding by a person other than the Indemnified Party, the
Stockholders' Representative, at the sole cost and expense of the Stockholders,
may, upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding if the Stockholders' Representative acknowledges
to the Indemnified Party in writing the obligation of the Stockholders to
indemnify the Indemnified Party with respect to all elements of such claim. If
the Stockholders' Representative assumes the defense of any such claim or legal
proceeding, the Stockholders' Representative shall select counsel reasonably
acceptable to the Indemnified Party to conduct the defense of such claims or
legal proceedings and at the sole cost and expense of the Stockholders shall
take all steps necessary in the defense or settlement thereof. The
Stockholders' Representative shall not consent to a settlement of, or the entry
of any judgment arising from, any such claim or legal proceeding, without the
prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed). The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense; provided, that if the Stockholders'
Representative assumes control of such defense and the Indemnified Party
reasonably concludes that the Stockholders' Representative and the Indemnified
Party have conflicting interests or different defenses available with respect to
such claim or legal proceeding, the reasonable fees and expenses of counsel to
the Indemnified Party shall be considered Damages for purposes of this
Agreement. If the Stockholders' Representative does not assume the defense of
any such claim or litigation resulting therefrom within 30 days after the date
such claim is made: (a) the Indemnified Party
-25-
<PAGE>
may defend against such claim or litigation in such manner as it may deem
appropriate, including, but not limited to, settling such claim or litigation,
after giving notice of the same to the Stockholders' Representative, on such
terms as the Indemnified Party may deem appropriate, and (b) the Stockholders'
Representative shall be entitled to participate in (but not control) the defense
of such action, with its counsel and at its own expense. If the Stockholders or
the Stockholders' Representative thereafter seek to question the manner in which
the Indemnified Party defended such third party claim or the amount or nature of
any such settlement, the Stockholders or the Stockholders' Representative shall
have the burden to prove by a preponderance of the evidence that the Indemnified
Party did not defend or settle such third party claim in a reasonably prudent
manner.
5.4 Payment of Indemnification Obligation. All indemnification by
-------------------------------------
the Stockholders hereunder shall be effected by payment of cash or delivery of a
cashier's or certified check to the Buyer in the amount of the indemnification
liability. If the Stockholders' Representative or any of the Stockholders is
required to make any indemnification payment pursuant to this Section 5, he or
they shall not have any rights to contribution from the Company. The Buyer
shall have the right, in its sole discretion, to set off any or all of such
indemnification liability against the Further Consideration and/or any
Contingent Consideration payable pursuant to this Agreement.
5.5 Survival. The representations, warranties, covenants and
--------
agreements of the Company and the Stockholders set forth in this Agreement shall
survive the Closing and the consummation of the transactions contemplated hereby
and continue until three years after the Closing Date. Notwithstanding the
foregoing, the representations and warranties contained in Sections 3.9, 3.12
and 3.21 shall each survive the Closing and the consummation of the transactions
contemplated thereby and continue until the expiration date of the applicable
statute of limitations, and the representations and warranties contained in
Sections 2 and 3.2 shall each survive the Closing and the consummation of the
transactions contemplated thereby and continue in full force and effect ad
infinitum.
5.6 Limitation. Notwithstanding anything to the contrary herein, the
----------
Stockholders shall not be liable under Section 5 unless and until the aggregate
Damages exceed $20,000 (at which point the Stockholders shall become liable for
the aggregate Damages, and not just amounts in excess of $20,000; provided,
however, that the aggregate Damages for which the Stockholders shall be liable
under Subsection 5.1(a)(i) shall not exceed the aggregate Purchase Price
received by the Stockholders.
-26-
<PAGE>
6. Ancillary Agreements
--------------------
6.1 Proprietary Information.
-----------------------
(a) The Stockholders shall hold in confidence all knowledge and
information of a secret or confidential nature with respect to the business of
the Company and shall not disclose, publish or make use of the same without the
consent of the Buyer, except to the extent that (i) disclosure is required by
law or legal process, (ii) such information shall have become public knowledge
other than by breach of this Agreement by any of the Stockholders, or (iii) such
information shall have been received by any of the Stockholders from a third
party who has the lawful right to make such disclosure without restriction.
(b) The Stockholders agree that the remedy at law for any breach of
this Subsection 6.1 would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Subsection 6.1.
6.2 Employment Agreements.
---------------------
(a) On the Closing Date, Richard L. High shall enter into an
employment agreement with the Buyer substantially in the form attached hereto as
Exhibit B.
- ---------
(b) On the Closing Date, Susanne W. High shall enter into an
employment agreement with the Buyer substantially in the form attached hereto as
Exhibit C.
- ---------
(c) On the Closing Date, Terry L. Maley shall enter into an employment
agreement with the Buyer substantially in the form attached hereto as Exhibit D.
---------
6.3 Bonus Pool. As soon as practicable after the Closing Date, the
----------
Buyer shall establish the 1999 Incentive Plan for High Technologies' Employees
substantially in the form attached hereto as Exhibit E.
---------
6.4 Communications. No public communications concerning this
--------------
Agreement shall be made without the mutual consent and cooperation of the Buyer,
the Company and the Stockholders, except as otherwise required by law or
governmental regulation.
-27-
<PAGE>
7. Dispute Resolution
------------------
7.1 General. In the event that any dispute should arise between the
-------
parties hereto with respect to any matter covered by this Agreement, including,
without limitation, the calculation of the Adjusted Purchase Price or claims
under Section 5, the parties hereto shall resolve such dispute in accordance
with the procedures set forth in this Section 7.
7.2 Consent of the Parties. In the event of any dispute between the
----------------------
parties with respect to any matter covered by this Agreement, the parties shall
first use their best efforts to resolve such dispute among themselves. If the
parties are unable to resolve the dispute within 30 calendar days after the
commencement of efforts to resolve the dispute, the dispute will be submitted to
arbitration in accordance with Subsection 7.3 hereof.
7.3 Arbitration
-----------
(a) Either the Buyer or the Stockholders' Representative may submit
any matter referred to in Subsection 7.2 hereof to arbitration by notifying the
Stockholders' Representative or the Buyer, as the case may be, in writing, of
such dispute. Within 15 days after receipt of such notice, the Buyer and the
Stockholders' Representative shall designate in writing one arbitrator to
resolve the dispute; provided, that if the parties hereto cannot agree on an
arbitrator within such 15-day period, the arbitrator shall be selected by the
American Arbitration Association from candidates not selected by the Buyer or
the Stockholders' Representative. The arbitrator so designated shall not be an
employee, consultant, officer, director or stockholder of any party hereto or
any Affiliate of any party to this Agreement.
(b) Within 30 days after the designation of the arbitrator, the
arbitrator, the Buyer and the Stockholders' Representative shall meet, at which
time the Buyer and the Stockholders' Representative shall be required to set
forth in writing all disputed issues and a proposed ruling on each such issue.
(c) The arbitrator shall set a date for a hearing, which shall be no
later than 30 days after the submission of written proposals pursuant to
paragraph (b) above, to discuss each of the issues identified by the Buyer and
the Stockholders' Representative. Each such party shall have the right to be
represented by counsel. The arbitration shall be governed by the rules of the
American Arbitration Association; provided, that the arbitrator shall have sole
discretion with regard to the admissibility of evidence.
(d) The arbitrator shall use his or her best efforts to rule on each
disputed issue within 30 days after the completion of the hearings described in
paragraph (c) above. The determination of the arbitrator as to the resolution
of any
-28-
<PAGE>
dispute shall be binding and conclusive upon all parties hereto. All rulings of
the arbitrator shall be in writing and shall be delivered to the parties hereto.
(e) Each party in any arbitration shall pay all fees and expenses
incurred by such party in connection with the arbitration.
(f) Any arbitration pursuant to this Subsection 7.3 shall be conducted
in Boston, Massachusetts. Any arbitration award may be entered in and enforced
by any court having jurisdiction thereover and the parties hereby consent and
commit themselves to the jurisdiction of the courts of the Commonwealth of
Massachusetts and the United States District Court for the District of
Massachusetts for purposes of the enforcement of any arbitration award.
7.4 Injunctive Relief. Notwithstanding any other provision of this
-----------------
Section 7, each party to this Agreement may seek (in addition to any other
rights or remedies which it may have) immediate injunctive relief in a court of
law to enforce the covenants contained in this Agreement. It is further agreed
that if any such action or proceeding is brought in equity, the other party will
not use as a defense that there is an adequate remedy at law or that this
Section 7 precludes such an action or proceeding in equity.
8. Notices
-------
Any notices or other communications required or permitted hereunder
shall be sufficiently given if in writing and delivered personally or sent by
telex, telecopy, Federal Express or other overnight courier, registered or
certified mail, postage prepaid, addressed as follows or to such other address
of which the parties may have given notice:
To the Buyer: Linkage, Inc.
One Forbes Road
Lexington, Massachusetts 02173
Attn: Larry R. Carr
With a copy to: Hal J. Leibowitz, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
-29-
<PAGE>
To the Stockholders or
Stockholders' Representative: Richard L. High
4100 Spring Valley Road
Suite 720
Dallas, Texas 75244
With a copy to: James S. Patterson, Esq,
Hiersche, Martens, Hayward, Drakeley &
Urbach, P.C.
The Colonnade-Rolm Tower
Suite 700, LB 17
15303 Dallas Parkway
Dallas, Texas 75248
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally or by telex
or telecopy, (b) the next business day, if delivered by Federal Express or other
overnight courier, charges prepaid, or (c) three business days after being sent,
if sent by registered or certified mail, first class postage prepaid.
9. Successors and Assigns
----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer, on the one hand, and the Stockholders and the Company, on the other hand,
may not assign their respective obligations hereunder without the prior written
consent of the other party; provided, however, that the Buyer may assign this
Agreement, and its rights and obligations hereunder, to a wholly owned
subsidiary of the Buyer. Any assignment in contravention of this provision
shall be void. No assignment shall release the Buyer, the Stockholders or the
Company from any obligation or liability under this Agreement. In addition, the
Stockholders may not assign any rights to receive payments under this Agreement
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld.
10. Entire Agreement; Amendments; Attachments
-----------------------------------------
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. The Buyer,
-30-
<PAGE>
by the consent of its Board of Directors or officers authorized by such Board,
the Company, by the consent of its Board of Directors or officers authorized by
such Board, and the Stockholders may amend or modify this Agreement, in such
manner as may be agreed upon, by a written instrument executed by the Buyer, the
Company and the Stockholders.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall prevail. The Schedules and Exhibits attached hereto are hereby
incorporated as integral parts of this Agreement.
11. Severability
------------
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
12. Investigation of the Parties
----------------------------
All representations and warranties contained herein which are made to
the knowledge of a party shall require that such party make reasonable
investigation and inquiry with respect thereto to ascertain the correctness and
validity thereof.
13. Expenses
--------
Except as otherwise expressly provided herein, the Buyer shall pay all
fees and expenses (including, without limitation, legal and accounting fees and
expenses) incurred by it in connection with the transactions contemplated
hereby, and the Stockholders shall pay all fees and expenses (including, without
limitation, legal and accounting fees and expenses) incurred by the
Stockholders, the Stockholders' Representative or the Company in connection with
the transactions contemplated hereby. Each Stockholder shall be responsible for
payment of all sales or transfer taxes arising out of the conveyance of the
Shares owned by such Stockholder.
14. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts without regard to conflict of laws
rules.
-31-
<PAGE>
15. Section Headings
----------------
The section headings are for the convenience of the parties and in no
way alter, modify, amend, limit or restrict the contractual obligations of the
parties.
16. Counterparts
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
17. Construction.
------------
The language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party. Any reference to any
federal, state, local or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise.
* * * * *
-32-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
LINKAGE, INC.
_________________________________
By:
Title:
HIGH, MALEY & MILHORN, INC.,
D/B/A/HIGH TECHNOLOGIES
_________________________________
By:
Title:
STOCKHOLDERS:
_______________________________
Richard L. High
_______________________________
Susanne W. High
_______________________________
Terry L. Maley
_______________________________
Randall C. Milhorn
-33-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of Initial Further First Second Third
Stockholder Shares Ownership Cash Payment Consideration Contingent Contingent Contingent
Payment Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. High 57,469 40.09% $200,450 $100,225 $14,031.50 $38,085.50 $ 48,108
- ------------------------------------------------------------------------------------------------------------------------------------
Susanne W. High 35,868 25.02% $125,100 $ 62,550 $ 8,757 $ 23,769 $ 30,024
- ------------------------------------------------------------------------------------------------------------------------------------
Terry L. Maley 39,514 27.57% $137,850 $ 68,925 $ 9,649.50 $26,191.50 $ 33,084
- ------------------------------------------------------------------------------------------------------------------------------------
Randall C. Milhorn 10,499 7.32% $ 36,600 $ 18,300 $ 2,562 $ 6,954 $ 8,784
- ------------------------------------------------------------------------------------------------------------------------------------
Total 143,350 100.00% $500,000 $250,000 $ 35,000 $ 95,000 $120,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-34-
<PAGE>
EXHIBIT A
COURSE LISTING
Advanced "C" Programming (CCC-201)
Advanced DB2 for Programmers (DB2-302)
Advanced QMF - Query Management Facility (DB2-204)
Basic "C" Programming (CCC-101)
C/S Developer New-Hire Program (NHP-101)
C++- Fast Track (CCC-103)
CICS Command Level Programming (CIC-101)
CICS Debugging Using CA-INTERTEST (CIC-102)
Client/Server Fundamentals (CSV-101)
COBOL/370 Fundamentals (COB-301)
Data Modeling (DES-101)
DB2 Concepts and Facilities (DB2-101)
DB2 Database Administration (DB2-203)
DB2 Design and Implementation (DB2-301)
DB2 Performance and Tuning (DB2-303)
DB2 Recovery and Utilities (DB2-304)
DB2/SQL Application Programming & Design (DB2-202)
DB2/SQL Application Programming (DB2-201)
Delphi 3.0 - Fast Track (DEL-103)
Fundamentals of C++ Programming (CCC-102)
IMS Advanced Programming Techniques (IMS-201)
IMS Basic Programming Techniques (IMS-101)
IMS HLPI (High Level Programming Interface) (IMS-104)
IMS Overview (IMS-105)
IMS Teleprocessing Techniques (IMS-102)
Intro to Relational Database Systems (DES-102)
Introduction to Delphi 3.0 (DEL-102)
MS Visual Basic - Fast Track 5.0 (VBP-103)
MS Visual Basic 5.0 - Advanced Programming Using ActivX & the Internet
Oracle - Application Developers Workshop (ORC-201)
OS/VS JCL and Utilities (JCL-101)
QMF - Query Management Facility (DB2-102)
Relational Database Modeling & Architecture (DES-103)
REXX Fundamentals (REX-101)
SQL - Structured Query Language (SQL-101)
TSO/ISPF (TSO-101)
VS COBOL II Differences (COB-102)
-35-
<PAGE>
EXHIBIT B
RICHARD L. HIGH EMPLOYMENT AGREEMENT
-36-
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made as of the 7th day of August, 1998 between Linkage,
Inc., a Massachusetts corporation with its principal offices at One Forbes Road,
Lexington, Massachusetts 02173 (the "Company"), and Richard L. High, an
-------
individual residing at 6211 Pepperport, Flower Mound, Texas 75022 (the
"Employee").
--------
RECITALS
--------
The Company desires to employ the Employee and the Employee desires to be
employed by the Company upon the terms and conditions hereinafter set forth.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, each intending
to be legally bound hereby, agree as follows:
1. Employment. The Company hereby employs the Employee in such position
----------
and capacity as the Employee and the Company shall from time to time determine,
and the Employee accepts such employment for the term of employment specified in
Section 3 below (the "Employment Term"). During the Employment Term, the
---------------
Employee shall have the duties, responsibilities and authority as are delegated
to him by the Company; provided, however, that during the Employment Term, such
duties shall include general management functions for the High Technologies
regional office of the Company to include profit and loss responsibility for
this business area. In this capacity, he shall have responsibility for the
supervision and performance management of the local staff, control of the
operating budget for the business area as determined in concert with the
Company's senior management, and for the overall quality of products and
services offered by High Technologies. It is also known and understood that the
Employee will serve as the primary instructor for mainframe courses.
2. Performance. The Employee agrees to devote his best efforts and all
-----------
of his business time to the performance of his duties hereunder during the
Employment Term.
3. Employment Term. The Employment Term shall begin on the date of this
---------------
Agreement and continue until December 31, 2000, unless earlier terminated
pursuant to Section 8.
-37-
<PAGE>
4. Compensation.
------------
(a) Salary. During the Employment Term, the Company shall pay the
------
Employee an annual base salary, payable in accordance with the Company's normal
payroll practice, subject to withholding and other applicable taxes, at the
annualized rate of $100,000 per year. The Employee's salary shall be subject to
review on an annual basis by senior management of the Company; provided,
however, that in no event shall the Employee's base salary be decreased.
(b) Additional Benefits. The Employee shall be entitled to
-------------------
participate in all benefit programs that the Company establishes and makes
available to its employees generally, if any, to the extent that Employee's
position, venue, tenure, salary, age, health and other qualifications make him
eligible to participate.
5. Expenses. The Employee shall be reimbursed by the Company for all
--------
actual and reasonable expenses incurred by him in connection with the
performance of his duties hereunder, subject to any policy with respect thereto
imposed by the Company from time to time.
6. Non-Competition and Non-Solicitation.
------------------------------------
(a) The Employee recognizes that his willingness to enter into the
restrictive covenants contained in this Section 6 was a critical condition
precedent to the Company's willingness to enter into and perform under this
Agreement. The Employee also acknowledges that the restrictions contained in
this Section 6 will not materially or unreasonably interfere with the Employee's
ability to earn a living, and that such restrictions are necessary to protect
the legitimate business interests of the Company.
(b) The Employee agrees that during the Non-Competition Period (as
defined below) he will not in any capacity, either separately, jointly or in
association with others, directly or indirectly, as an officer, director,
consultant, agent, employee, owner, partner, joint venturer, distributor,
dealer, representative, stockholder, investor, lender or otherwise, engage or
have a financial interest in any business which competes with the Company or
with any affiliate of the Company (excepting only the ownership of not more than
1% of the outstanding securities of any class listed on an exchange or regularly
traded in the over-the-counter market). An entity shall be deemed to compete
with the Company or one of the Company's affiliates as of a particular time if
the entity then produces, distributes or markets any product or service which is
competitive with, and may be purchased in replacement or substitution of, any
product or service which was being distributed or marketed by the Company or
such affiliate during the Employment Term, and which is then still being
marketed or distributed by the Company or such affiliate or which the Company or
such affiliate was considering marketing or distributing during the Employment
Term. The Company or its affiliate
-38-
<PAGE>
shall be deemed to be considering marketing or distributing a product or service
as of a particular date only if the Company or such affiliate intends to market
or distribute such product or service within two years of such date. The "Non-
---
Competition Period" is (a) the period during which the Employee is employed by
- ------------------
the Company, whether or not pursuant to this Agreement, plus (b) a period of two
years thereafter.
(c) The Employee further agrees that during the Non-Competition Period
he will not in any capacity, either separately, jointly or in association with
others, directly or indirectly, solicit, divert or take away, attempt to take
away or otherwise contact any of the Company's clients, customers, accounts,
distributors, dealers or representatives as shown by the Company's records, that
were clients, customers, prospective clients or customers, accounts,
distributors, dealers or representatives of the Company at any time during the
two years immediately preceding the date of termination of the Employee's
employment by the Company if such solicitation or contact is for the specific
purpose of selling products or services that compete with any products or
services that the Company has available for sale to its clients, customers,
accounts, distributors, dealers or representatives or prospects. The Employee
further agrees that during the Non-Competition Period he will not in any
capacity, either separately, jointly or in association with others, directly or
indirectly, recruit, solicit or hire any employee or consultant of the Company
or induce or attempt to induce any employee or consultant of the Company to
terminate his or her employment or consultancy with, or otherwise cease his or
her relationship with, the Company. For purposes of this Agreement,
"prospective clients or customers" shall mean any person, school, college,
university or entity that the Company has actively solicited with respect to the
Company's consulting services or corporate education programs during the term of
the Employee's employment with the Company, whether or not such employment is
pursuant to this Agreement.
(d) If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable law, including with respect to
time or space, the court is hereby requested and authorized by the parties
hereto to revise the foregoing restrictions to include the maximum restrictions
allowed under the applicable law. The Employee expressly agrees that breach of
the foregoing would result in irreparable injuries to the Company, that the
remedy at law for any such breach will be inadequate and that upon any breach of
this provision, the Company, in addition to all other available remedies, shall
be entitled as a matter of right to injunctive relief in any court of competent
jurisdiction without the necessity of proving the actual damage to the Company.
The parties hereto intend that these non-competition and non-solicitation
provisions shall be deemed to be a series of separate covenants, one for each
and every county of each and every state of the United States of America and
each and every political subdivision of each and every country outside the
United States of America where this provision is intended to be effective. For
purposes of this Section 6 and Section 7, the "Company" refers to the Company
and any subsidiaries of the Company.
-39-
<PAGE>
7. Secret Processes and Confidential Information.
---------------------------------------------
(a) For the Employment Term and thereafter, (i) the Employee will not
divulge, directly or indirectly, other than in the regular and proper course of
business of the Company or as required by law, any confidential knowledge or
information with respect to the business, operation or finances of the Company,
including without limitation, inventions, products, machinery, processes,
methods, techniques, compositions, projects, developments, plans, financial
data, personnel data, computer programs and customer and supplier lists
(collectively, "Confidential Information"), and (ii) the Employee will not use,
------------------------
directly or indirectly, any Confidential Information for the benefit of anyone
other than the Company; provided, however, that the Employee has no obligation,
express or implied, to refrain from using or disclosing to others any such
knowledge or information which is or hereafter shall become generally available
to the public other than through disclosure by the Employee or which is received
by the Employee from a third party who has the lawful right to make such
disclosure without restriction. The Employee agrees that all files, letters,
memoranda, reports, records, data, sketches, drawings, program listings or other
written, photographic, or other tangible material containing Confidential
Information, whether created by the Employee or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
Company to be used by the Employee only in the performance of his duties for the
Company.
(b) All new processes, techniques, know-how, inventions, improvements,
discoveries, methods, plans, products, works of authorship, patents and devices
developed, made or invented by the Employee, alone or with others, whether
patentable or not, while an employee of the Company (collectively, the
"Developments"), shall become and be the sole property of the Company unless
- -------------
released in writing by the Company. The Employee agrees to assign and does
hereby assign to the Company (or any person or entity designated by the Company)
all his right, title and interest in and to all Developments and all related
patents, patent applications, copyrights and copyright applications. In
addition, the Employee agrees to cooperate fully with the Company, both during
and after his employment with the Company, with respect to the procurement,
maintenance and enforcement of copyrights and patents (both in the United States
and foreign countries) relating to Developments. The Employee shall sign all
papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignments of priority
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development. The
Employee also hereby waives all claims to moral rights in any Development.
(c) Notwithstanding the foregoing, if the Employee is required to
disclose or divulge Confidential Information pursuant to any subpoena or other
judicial process he will promptly so notify the Company, and if so requested by
the Company, will assist the Company in seeking a protective order with respect
thereto. If the
-40-
<PAGE>
Company cannot or chooses not to obtain such a protective order, the Employee
will divulge only such Confidential Information as he is advised by his counsel
is required to be disclosed, and will use his best efforts to ensure that the
balance of such Confidential Information will be kept confidential.
8. Termination.
-----------
(a) Termination at End of Term. The employment of the Employee
--------------------------
hereunder shall terminate at the end of the Employment Term, at which time the
Employee may become an employee-at-will of the Company upon the mutual agreement
of the Employee and the Company.
(b) Termination by the Company With Cause. The Company shall have the
-------------------------------------
right at any time to terminate the Employee's employment hereunder by written
notice upon the occurrence of any of the following (any such termination being
referred to as a termination for "Cause"):
-----
(i) the commission by the Employee of any deliberate and premeditated
act, or any gross negligence in the performance of his duties, that
materially and adversely affects the business, financial condition or
results of operations of the Company;
(ii) Employee's habitual drunkenness, use of illegal substances or
drugs or the use, possession, distribution or being under the influence of
alcohol or illegal substances or drugs in the workplace;
(iii) the conviction by the Employee of a felony;
(iv) the wilful failure or refusal of the Employee to perform his
duties hereunder, which failure or refusal continues for 30 days after
written notice thereof from the Company to the Employee; or
(v) the breach by the Employee of any terms of this Agreement, which
breach continues for 30 days subsequent to written notice from the Company
to the Employee of the breach.
(c) Termination by Company for Death or Disability. The Company shall
----------------------------------------------
have the right at any time to terminate the Employee's employment hereunder by
30 days' written notice upon the Employee's inability to perform his duties
hereunder by reason of any mental, physical or other disability for a period of
at least six consecutive months (referred to herein as a "disability"), as
----------
determined by an independent physician. The Employee's employment hereunder
shall also terminate upon the death of the Employee.
-41-
<PAGE>
(d) Termination by Company without Cause. The Company shall have the
------------------------------------
right at any time by 30 days' written notice to Employee to terminate the
Employee's employment for any other reason without Cause.
(e) Termination by Employee for Good Reason. The Employee shall have
---------------------------------------
the right at any time to terminate the Employee's employment hereunder by
written notice to the Company upon the occurrence of any of the following
events, which event continues for 30 days subsequent to such notice:
(i) a material reduction of the Employee's duties, responsibilities
and authority from those described in Section 1;
(ii) a required relocation of the Employee to a principal place of
business more than 100 miles from the Employee's principal place of
business on the date of this Agreement; or
(iii) the breach by the Company of a material term of this Agreement.
9. Effect of Termination of Employment.
-----------------------------------
(a) With Cause. If the Employee's employment is terminated with Cause
----------
(pursuant to Section 8(b)), all compensation and benefits shall cease at the
time of such termination; provided, however, that the Employee shall be entitled
to continue to participate in the Company's medical benefit plans, at his own
expense, to the extent required by law.
(b) Death or Disability. If the Employee's employment is terminated
-------------------
by the death or disability of the Employee (pursuant to Section 8(c)), all
compensation and benefits shall cease at the time of such death or disability;
provided, however, that the Employee or, in the event of the death of the
Employee, the Employee's estate, shall be entitled to continue to participate in
the Company's medical benefit plans, at his expense or the expense of his
estate, to the extent required by law.
(c) Without Cause or For Good Reason. If the Employee's employment is
--------------------------------
terminated by the Company without Cause (pursuant to Section 8(d)) or for Good
Reason (pursuant to Section 8(e)), then the Employee shall be entitled to the
following benefits in complete discharge of the Company's obligations hereunder:
(i) the Employee's salary specified in Section 4(a) shall continue to
be paid for the duration of the Employment Term; and
(ii) the Employee's additional benefits specified in Section 4(b)
shall terminate at the time of such termination; provided, however, that
the Employee
-42-
<PAGE>
shall be entitled to participate in the Company's medical benefit plans, at
the Company's expense, for the duration of the Employment Term.
(d) Survival. The provisions of Sections 6 and 7 of this Agreement
--------
shall survive the termination of the Employee's employment and the termination
of this Agreement.
10. Insurance. The Company may purchase insurance on the life of the
---------
Employee, and if it does so, the Employee shall cooperate fully by performing
all the requirements of the life insurer which are necessary conditions
precedent to the issuance of the life insurance policy issued by it.
Notwithstanding the foregoing, if at the time of termination for any reason
(other than death), the Company is maintaining a life insurance policy on the
Employee which has a cash surrender value, then to the extent permitted under
such policy the Employee may purchase such policy from the Company by paying to
the Company the cash surrender value thereof.
11. Notice. Any notices required or permitted hereunder shall be in
------
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the addresses set
forth above or to such other addresses as the parties may hereafter give notice
provided herein.
12. General.
-------
(a) Prior Agreements. This Agreement supersedes and replaces all
----------------
prior agreements between the Company and the Employee, whether written or oral,
relating to his employment by the Company.
(b) Governing Law. The terms of this Agreement shall be governed by
-------------
the internal laws (and not the law of conflicts) of the Commonwealth of
Massachusetts.
(c) Assignability. The Employee may not assign his interest in or
-------------
delegate his duties under this Agreement. The covenants and obligations of the
Employee hereunder shall redound to the benefit of the Company's successors and
assigns.
(d) Binding Effect. This Agreement shall be binding upon and inure to
--------------
the benefit of the Company, its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
-------------------------------
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
--------
Agreement shall continue for so long as any obligations remain under this
Agreement.
-43-
<PAGE>
(g) Specific Performance. The Employee acknowledges that a breach of
--------------------
this Agreement by the Employee will cause irreparable injury to the Company,
that the Company's remedies at law will be inadequate in case of any such
breach, and that the Company will be entitled to preliminary injunctive relief
in case of any such breach.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement the day and year first written above.
LINKAGE, INC.
By:_________________________________
Name:
Title:
EMPLOYEE
____________________________________
Richard L. High
-44-
<PAGE>
EXHIBIT C
SUSANNE W. HIGH EMPLOYMENT AGREEMENT
-45-
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made as of the 7th day of August, 1998 between Linkage,
Inc., a Massachusetts corporation with its principal offices at One Forbes Road,
Lexington, Massachusetts 02173 (the "Company"), and Susanne W. High, an
-------
individual residing at 6211 Pepperport, Flower Mound, Texas 75022 (the
"Employee").
--------
RECITALS
--------
The Company desires to employ the Employee and the Employee desires to be
employed by the Company upon the terms and conditions hereinafter set forth.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, each intending
to be legally bound hereby, agree as follows:
1. Employment. The Company hereby employs the Employee in such position
----------
and capacity as the Employee and the Company shall from time to time determine,
and the Employee accepts such employment for the term of employment specified in
Section 3 below (the "Employment Term"). During the Employment Term, the
---------------
Employee shall have the duties, responsibilities and authority as are delegated
to her by the Company; provided, however, that during the Employment Term, such
duties shall include coordinating all courseware development, supervising
general office management activities, providing primary support and contact with
Universities for the Client/Server curriculum, and serving as the primary
instructor for Visual Basic courseware.
2. Performance. The Employee agrees to devote her best efforts and all
-----------
of her business time to the performance of her duties hereunder during the
Employment Term.
3. Employment Term. The Employment Term shall begin on the date of this
---------------
Agreement and continue until December 31, 2000, unless earlier terminated
pursuant to Section 8.
-46-
<PAGE>
4. Compensation.
------------
(a) Salary. During the Employment Term, the Company shall pay the
------
Employee an annual base salary, payable in accordance with the Company's normal
payroll practice, subject to withholding and other applicable taxes, at the
annualized rate of $80,000 per year. The Employee's salary shall be subject to
review on an annual basis by senior management of the Company; provided,
however, that in no event shall the Employee's base salary be decreased.
(b) Additional Benefits. The Employee shall be entitled to
-------------------
participate in all benefit programs that the Company establishes and makes
available to its employees generally, if any, to the extent that Employee's
position, venue, tenure, salary, age, health and other qualifications make her
eligible to participate.
5. Expenses. The Employee shall be reimbursed by the Company for all
--------
actual and reasonable expenses incurred by her in connection with the
performance of her duties hereunder, subject to any policy with respect thereto
imposed by the Company from time to time.
6. Non-Competition and Non-Solicitation.
------------------------------------
(a) The Employee recognizes that her willingness to enter into the
restrictive covenants contained in this Section 6 was a critical condition
precedent to the Company's willingness to enter into and perform under this
Agreement. The Employee also acknowledges that the restrictions contained in
this Section 6 will not materially or unreasonably interfere with the Employee's
ability to earn a living, and that such restrictions are necessary to protect
the legitimate business interests of the Company.
(b) The Employee agrees that during the Non-Competition Period (as
defined below) she will not in any capacity, either separately, jointly or in
association with others, directly or indirectly, as an officer, director,
consultant, agent, employee, owner, partner, joint venturer, distributor,
dealer, representative, stockholder, investor, lender or otherwise, engage or
have a financial interest in any business which competes with the Company or
with any affiliate of the Company (excepting only the ownership of not more than
1% of the outstanding securities of any class listed on an exchange or regularly
traded in the over-the-counter market). An entity shall be deemed to compete
with the Company or one of the Company's affiliates as of a particular time if
the entity then produces, distributes or markets any product or service which is
competitive with, and may be purchased in replacement or substitution of, any
product or service which was being distributed or marketed by the Company or
such affiliate during the Employment Term, and which is then still being
marketed or distributed by the Company or such affiliate or which the Company or
such affiliate was considering marketing or distributing during the Employment
Term. The Company or its affiliate shall be deemed to be considering marketing
or distributing a product or service as of
-47-
<PAGE>
a particular date only if the Company or such affiliate intends to market or
distribute such product or service within two years of such date. The "Non-
----
Competition Period" is (a) the period during which the Employee is employed by
- ------------------
the Company, whether or not pursuant to this Agreement, plus (b) a period of two
years thereafter.
(c) The Employee further agrees that during the Non-Competition Period
she will not in any capacity, either separately, jointly or in association with
others, directly or indirectly, solicit, divert or take away, attempt to take
away or otherwise contact any of the Company's clients, customers, accounts,
distributors, dealers or representatives as shown by the Company's records, that
were clients, customers, prospective clients or customers, accounts,
distributors, dealers or representatives of the Company at any time during the
two years immediately preceding the date of termination of the Employee's
employment by the Company if such solicitation or contact is for the specific
purpose of selling products or services that compete with any products or
services that the Company has available for sale to its clients, customers,
accounts, distributors, dealers or representatives or prospects. The Employee
further agrees that during the Non-Competition Period she will not in any
capacity, either separately, jointly or in association with others, directly or
indirectly, recruit, solicit or hire any employee or consultant of the Company
or induce or attempt to induce any employee or consultant of the Company to
terminate his or her employment or consultancy with, or otherwise cease his or
her relationship with, the Company. For purposes of this Agreement,
"prospective clients or customers" shall mean any person, school, college,
university or entity that the Company has actively solicited with respect to the
Company's consulting services or corporate education programs during the term of
the Employee's employment with the Company, whether or not such employment is
pursuant to this Agreement.
(d) If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable law, including with respect to
time or space, the court is hereby requested and authorized by the parties
hereto to revise the foregoing restrictions to include the maximum restrictions
allowed under the applicable law. The Employee expressly agrees that breach of
the foregoing would result in irreparable injuries to the Company, that the
remedy at law for any such breach will be inadequate and that upon any breach of
this provision, the Company, in addition to all other available remedies, shall
be entitled as a matter of right to injunctive relief in any court of competent
jurisdiction without the necessity of proving the actual damage to the Company.
The parties hereto intend that these non-competition and non-solicitation
provisions shall be deemed to be a series of separate covenants, one for each
and every county of each and every state of the United States of America and
each and every political subdivision of each and every country outside the
United States of America where this provision is intended to be effective. For
purposes of this Section 6 and Section 7, the "Company" refers to the Company
and any subsidiaries of the Company.
-48-
<PAGE>
7. Secret Processes and Confidential Information.
---------------------------------------------
(a) For the Employment Term and thereafter, (i) the Employee will not
divulge, directly or indirectly, other than in the regular and proper course of
business of the Company or as required by law, any confidential knowledge or
information with respect to the business, operation or finances of the Company,
including without limitation, inventions, products, machinery, processes,
methods, techniques, compositions, projects, developments, plans, financial
data, personnel data, computer programs and customer and supplier lists
(collectively, "Confidential Information"), and (ii) the Employee will not use,
------------------------
directly or indirectly, any Confidential Information for the benefit of anyone
other than the Company; provided, however, that the Employee has no obligation,
express or implied, to refrain from using or disclosing to others any such
knowledge or information which is or hereafter shall become generally available
to the public other than through disclosure by the Employee or which is received
by the Employee from a third party who has the lawful right to make such
disclosure without restriction. The Employee agrees that all files, letters,
memoranda, reports, records, data, sketches, drawings, program listings or other
written, photographic, or other tangible material containing Confidential
Information, whether created by the Employee or others, which shall come into
her custody or possession, shall be and are the exclusive property of the
Company to be used by the Employee only in the performance of her duties for the
Company.
(b) All new processes, techniques, know-how, inventions, improvements,
discoveries, methods, plans, products, works of authorship, patents and devices
developed, made or invented by the Employee, alone or with others, whether
patentable or not, while an employee of the Company (collectively, the
"Developments"), shall become and be the sole property of the Company unless
- -------------
released in writing by the Company. The Employee agrees to assign and does
hereby assign to the Company (or any person or entity designated by the Company)
all her right, title and interest in and to all Developments and all related
patents, patent applications, copyrights and copyright applications. In
addition, the Employee agrees to cooperate fully with the Company, both during
and after her employment with the Company, with respect to the procurement,
maintenance and enforcement of copyrights and patents (both in the United States
and foreign countries) relating to Developments. The Employee shall sign all
papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignments of priority
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development. The
Employee also hereby waives all claims to moral rights in any Development.
(c) Notwithstanding the foregoing, if the Employee is required to
disclose or divulge Confidential Information pursuant to any subpoena or other
judicial process she will promptly so notify the Company, and if so requested by
the Company, will assist the Company in seeking a protective order with respect
thereto. If the
-49-
<PAGE>
Company cannot or chooses not to obtain such a protective order, the Employee
will divulge only such Confidential Information as she is advised by her counsel
is required to be disclosed, and will use her best efforts to ensure that the
balance of such Confidential Information will be kept confidential.
8. Termination.
-----------
(a) Termination at End of Term. The employment of the Employee
--------------------------
hereunder shall terminate at the end of the Employment Term, at which time the
Employee may become an employee-at-will of the Company upon the mutual agreement
of the Employee and the Company.
(b) Termination by the Company With Cause. The Company shall have the
-------------------------------------
right at any time to terminate the Employee's employment hereunder by written
notice upon the occurrence of any of the following (any such termination being
referred to as a termination for "Cause"):
-----
(i) the commission by the Employee of any deliberate and premeditated
act, or any gross negligence in the performance of her duties, that
materially and adversely affects the business, financial condition or
results of operations of the Company;
(ii) Employee's habitual drunkenness, use of illegal substances or
drugs or the use, possession, distribution or being under the influence of
alcohol or illegal substances or drugs in the workplace;
(iii) the conviction by the Employee of a felony;
(iv) the wilful failure or refusal of the Employee to perform her
duties hereunder, which failure or refusal continues for 30 days after
written notice thereof from the Company to the Employee; or
(v) the breach by the Employee of any terms of this Agreement, which
breach continues for 30 days subsequent to written notice from the Company
to the Employee of the breach.
(c) Termination by Company for Death or Disability. The Company shall
----------------------------------------------
have the right at any time to terminate the Employee's employment hereunder by
30 days' written notice upon the Employee's inability to perform her duties
hereunder by reason of any mental, physical or other disability for a period of
at least six consecutive months (referred to herein as a "disability"), as
----------
determined by an independent physician. The Employee's employment hereunder
shall also terminate upon the death of the Employee.
-50-
<PAGE>
(d) Termination by Company without Cause. The Company shall have the
------------------------------------
right at any time by 30 days' written notice to Employee to terminate the
Employee's employment for any other reason without Cause.
(e) Termination by Employee for Good Reason. The Employee shall have
---------------------------------------
the right at any time to terminate the Employee's employment hereunder by
written notice to the Company upon the occurrence of any of the following
events, which event continues for 30 days subsequent to such notice:
(i) a material reduction of the Employee's duties, responsibilities
and authority from those described in Section 1;
(ii) a required relocation of the Employee to a principal place of
business more than 100 miles from the Employee's principal place of
business on the date of this Agreement; or
(iii) the breach by the Company of a material term of this Agreement.
9. Effect of Termination of Employment.
-----------------------------------
(a) With Cause. If the Employee's employment is terminated with Cause
----------
(pursuant to Section 8(b)), all compensation and benefits shall cease at the
time of such termination; provided, however, that the Employee shall be entitled
to continue to participate in the Company's medical benefit plans, at her own
expense, to the extent required by law.
(b) Death or Disability. If the Employee's employment is terminated
-------------------
by the death or disability of the Employee (pursuant to Section 8(c)), all
compensation and benefits shall cease at the time of such death or disability;
provided, however, that the Employee or, in the event of the death of the
Employee, the Employee's estate, shall be entitled to continue to participate in
the Company's medical benefit plans, at her expense or the expense of her
estate, to the extent required by law.
(c) Without Cause or For Good Reason. If the Employee's employment is
--------------------------------
terminated by the Company without Cause (pursuant to Section 8(d)) or for Good
Reason (pursuant to Section 8(e)), then the Employee shall be entitled to the
following benefits in complete discharge of the Company's obligations hereunder:
(i) the Employee's salary specified in Section 4(a) shall continue to
be paid for the duration of the Employment Term; and
(ii) the Employee's additional benefits specified in Section 4(b)
shall terminate at the time of such termination; provided, however, that
the Employee
-51-
<PAGE>
shall be entitled to participate in the Company's medical benefit plans, at
the Company's expense, for the duration of the Employment Term.
(d) Survival. The provisions of Sections 6 and 7 of this Agreement
--------
shall survive the termination of the Employee's employment and the termination
of this Agreement.
10. Insurance. The Company may purchase insurance on the life of the
---------
Employee, and if it does so, the Employee shall cooperate fully by performing
all the requirements of the life insurer which are necessary conditions
precedent to the issuance of the life insurance policy issued by it.
Notwithstanding the foregoing, if at the time of termination for any reason
(other than death), the Company is maintaining a life insurance policy on the
Employee which has a cash surrender value, then to the extent permitted under
such policy the Employee may purchase such policy from the Company by paying to
the Company the cash surrender value thereof.
11. Notice. Any notices required or permitted hereunder shall be in
------
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the addresses set
forth above or to such other addresses as the parties may hereafter give notice
provided herein.
12. General.
-------
(a) Prior Agreements. This Agreement supersedes and replaces all
----------------
prior agreements between the Company and the Employee, whether written or oral,
relating to her employment by the Company.
(b) Governing Law. The terms of this Agreement shall be governed by
-------------
the internal laws (and not the law of conflicts) of the Commonwealth of
Massachusetts.
(c) Assignability. The Employee may not assign her interest in or
-------------
delegate her duties under this Agreement. The covenants and obligations of the
Employee hereunder shall redound to the benefit of the Company's successors and
assigns.
(d) Binding Effect. This Agreement shall be binding upon and inure to
--------------
the benefit of the Company, its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
-------------------------------
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
--------
Agreement shall continue for so long as any obligations remain under this
Agreement.
-52-
<PAGE>
(g) Specific Performance. The Employee acknowledges that a breach of
--------------------
this Agreement by the Employee will cause irreparable injury to the Company,
that the Company's remedies at law will be inadequate in case of any such
breach, and that the Company will be entitled to preliminary injunctive relief
in case of any such breach.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement the day and year first written above.
LINKAGE, INC.
By:_________________________________
Name:
Title:
EMPLOYEE
____________________________________
Susanne W. High
-53-
<PAGE>
EXHIBIT D
TERRY L. MALEY EMPLOYMENT AGREEMENT
-54-
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made as of the 7th day of August, 1998 between Linkage,
Inc, a Massachusetts corporation with its principal offices at One Forbes Road,
Lexington, Massachusetts 02173 (the "Company"), and Terry L. Maley, an
-------
individual residing at 1873 Amber Lane, Carrollton, Texas 75007 (the
"Employee").
--------
RECITALS
--------
The Company desires to employ the Employee and the Employee desires to be
employed by the Company upon the terms and conditions hereinafter set forth.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, each intending
to be legally bound hereby, agree as follows:
1. Employment. The Company hereby employs the Employee in such position
----------
and capacity as the Employee and the Company shall from time to time determine,
and the Employee accepts such employment for the term of employment specified in
Section 3 below (the "Employment Term"). During the Employment Term, the
---------------
Employee shall have the duties, responsibilities and authority as are delegated
to him by the Company; provided, however, that during the Employment Term such
duties shall include providing instruction for mainframe classes and courseware
modification.
2. Performance. The Employee agrees to devote his best efforts and all
-----------
of his business time to the performance of his duties hereunder during the
Employment Term.
3. Employment Term. The Employment Term shall begin on the date of this
---------------
Agreement and continue until December 31, 2000, unless earlier terminated
pursuant to Section 8.
4. Compensation.
------------
(a) Salary. During the Employment Term, the Company shall pay the
------
Employee an annual base salary, payable in accordance with the Company's normal
payroll practice, subject to withholding and other applicable taxes, at the
annualized rate of $90,000 per year. The Employee's salary shall be subject to
review on an annual basis
-55-
<PAGE>
by senior management of the Company; provided, however, that in no event shall
the Employee's base salary be decreased.
(b) Additional Benefits. The Employee shall be entitled to
-------------------
participate in all benefit programs that the Company establishes and makes
available to its employees generally, if any, to the extent that Employee's
position, venue, tenure, salary, age, health and other qualifications make him
eligible to participate.
5. Expenses. The Employee shall be reimbursed by the Company for all
--------
actual and reasonable expenses incurred by him in connection with the
performance of his duties hereunder, subject to any policy with respect thereto
imposed by the Company from time to time.
6. Non-Competition and Non-Solicitation.
------------------------------------
(a) The Employee recognizes that his willingness to enter into the
restrictive covenants contained in this Section 6 was a critical condition
precedent to the Company's willingness to enter into and perform under this
Agreement. The Employee also acknowledges that the restrictions contained in
this Section 6 will not materially or unreasonably interfere with the Employee's
ability to earn a living, and that such restrictions are necessary to protect
the legitimate business interests of the Company.
(b) The Employee agrees that during the Non-Competition Period (as
defined below) he will not in any capacity, either separately, jointly or in
association with others, directly or indirectly, as an officer, director,
consultant, agent, employee, owner, partner, joint venturer, distributor,
dealer, representative, stockholder, investor, lender or otherwise, engage or
have a financial interest in any business which competes with the Company or
with any affiliate of the Company (excepting only the ownership of not more than
1% of the outstanding securities of any class listed on an exchange or regularly
traded in the over-the-counter market). An entity shall be deemed to compete
with the Company or one of the Company's affiliates as of a particular time if
the entity then produces, distributes or markets any product or service which is
competitive with, and may be purchased in replacement or substitution of, any
product or service which was being distributed or marketed by the Company or
such affiliate during the Employment Term, and which is then still being
marketed or distributed by the Company or such affiliate or which the Company or
such affiliate was considering marketing or distributing during the Employment
Term. The Company or its affiliate shall be deemed to be considering marketing
or distributing a product or service as of a particular date only if the Company
or such affiliate intends to market or distribute such product or service within
two years of such date. The "Non-Competition Period" is (a) the period during
----------------------
which the Employee is employed by the Company, whether or not pursuant to this
Agreement, plus (b) a period of two years thereafter.
-56-
<PAGE>
(c) The Employee further agrees that during the Non-Competition Period
he will not in any capacity, either separately, jointly or in association with
others, directly or indirectly, solicit, divert or take away, attempt to take
away or otherwise contact any of the Company's clients, customers, accounts,
distributors, dealers or representatives as shown by the Company's records, that
were clients, customers, prospective clients or customers, accounts,
distributors, dealers or representatives of the Company at any time during the
two years immediately preceding the date of termination of the Employee's
employment by the Company if such solicitation or contact is for the specific
purpose of selling products or services that compete with any products or
services that the Company has available for sale to its clients, customers,
accounts, distributors, dealers or representatives or prospects. The Employee
further agrees that during the Non-Competition Period he will not in any
capacity, either separately, jointly or in association with others, directly or
indirectly, recruit, solicit or hire any employee or consultant of the Company
or induce or attempt to induce any employee or consultant of the Company to
terminate his or her employment or consultancy with, or otherwise cease his or
her relationship with, the Company. For purposes of this Agreement,
"prospective clients or customers" shall mean any person, school, college,
university or entity that the Company has actively solicited with respect to the
Company's consulting services or corporate education programs during the term of
the Employee's employment with the Company, whether or not such employment is
pursuant to this Agreement.
(d) If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable law, including with respect to
time or space, the court is hereby requested and authorized by the parties
hereto to revise the foregoing restrictions to include the maximum restrictions
allowed under the applicable law. The Employee expressly agrees that breach of
the foregoing would result in irreparable injuries to the Company, that the
remedy at law for any such breach will be inadequate and that upon any breach of
this provision, the Company, in addition to all other available remedies, shall
be entitled as a matter of right to injunctive relief in any court of competent
jurisdiction without the necessity of proving the actual damage to the Company.
The parties hereto intend that these non-competition and non-solicitation
provisions shall be deemed to be a series of separate covenants, one for each
and every county of each and every state of the United States of America and
each and every political subdivision of each and every country outside the
United States of America where this provision is intended to be effective. For
purposes of this Section 6 and Section 7, the "Company" refers to the Company
and any subsidiaries of the Company.
-57-
<PAGE>
7. Secret Processes and Confidential Information.
---------------------------------------------
(a) For the Employment Term and thereafter, (i) the Employee will not
divulge, directly or indirectly, other than in the regular and proper course of
business of the Company or as required by law, any confidential knowledge or
information with respect to the business, operation or finances of the Company,
including without limitation, inventions, products, machinery, processes,
methods, techniques, compositions, projects, developments, plans, financial
data, personnel data, computer programs and customer and supplier lists
(collectively, "Confidential Information"), and (ii) the Employee will not use,
------------------------
directly or indirectly, any Confidential Information for the benefit of anyone
other than the Company; provided, however, that the Employee has no obligation,
express or implied, to refrain from using or disclosing to others any such
knowledge or information which is or hereafter shall become generally available
to the public other than through disclosure by the Employee or which is received
by the Employee from a third party who has the lawful right to make such
disclosure without restriction. The Employee agrees that all files, letters,
memoranda, reports, records, data, sketches, drawings, program listings or other
written, photographic, or other tangible material containing Confidential
Information, whether created by the Employee or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
Company to be used by the Employee only in the performance of his duties for the
Company.
(b) All new processes, techniques, know-how, inventions, improvements,
discoveries, methods, plans, products, works of authorship, patents and devices
developed, made or invented by the Employee, alone or with others, whether
patentable or not, while an employee of the Company (collectively, the
"Developments"), shall become and be the sole property of the Company unless
- -------------
released in writing by the Company. The Employee agrees to assign and does
hereby assign to the Company (or any person or entity designated by the Company)
all his right, title and interest in and to all Developments and all related
patents, patent applications, copyrights and copyright applications. In
addition, the Employee agrees to cooperate fully with the Company, both during
and after his employment with the Company, with respect to the procurement,
maintenance and enforcement of copyrights and patents (both in the United States
and foreign countries) relating to Developments. The Employee shall sign all
papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignments of priority
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development. The
Employee also hereby waives all claims to moral rights in any Development.
(c) Notwithstanding the foregoing, if the Employee is required to
disclose or divulge Confidential Information pursuant to any subpoena or other
judicial process he will promptly so notify the Company, and if so requested by
the Company, will assist the Company in seeking a protective order with respect
thereto. If the
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<PAGE>
Company cannot or chooses not to obtain such a protective order, the Employee
will divulge only such Confidential Information as he is advised by his counsel
is required to be disclosed, and will use his best efforts to ensure that the
balance of such Confidential Information will be kept confidential.
8. Termination.
-----------
(a) Termination at End of Term. The employment of the Employee
--------------------------
hereunder shall terminate at the end of the Employment Term, at which time the
Employee may become an employee-at-will of the Company upon the mutual agreement
of the Employee and the Company.
(b) Termination by the Company With Cause. The Company shall have the
-------------------------------------
right at any time to terminate the Employee's employment hereunder by written
notice upon the occurrence of any of the following (any such termination being
referred to as a termination for "Cause"):
-----
(i) the commission by the Employee of any deliberate and premeditated
act, or any gross negligence in the performance of his duties, that
materially and adversely affects the business, financial condition or
results of operations of the Company;
(ii) Employee's habitual drunkenness, use of illegal substances or
drugs or the use, possession, distribution or being under the influence of
alcohol or illegal substances or drugs in the workplace;
(iii) the conviction by the Employee of a felony;
(iv) the wilful failure or refusal of the Employee to perform his
duties hereunder, which failure or refusal continues for 30 days after
written notice thereof from the Company to the Employee; or
(v) the breach by the Employee of any terms of this Agreement, which
breach continues for 30 days subsequent to written notice from the Company
to the Employee of the breach.
(c) Termination by Company for Death or Disability. The Company shall
----------------------------------------------
have the right at any time to terminate the Employee's employment hereunder by
30 days' written notice upon the Employee's inability to perform his duties
hereunder by reason of any mental, physical or other disability for a period of
at least six consecutive months (referred to herein as a "disability"), as
----------
determined by an independent physician. The Employee's employment hereunder
shall also terminate upon the death of the Employee.
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<PAGE>
(d) Termination by Company without Cause. The Company shall have the
------------------------------------
right at any time by 30 days' written notice to Employee to terminate the
Employee's employment for any other reason without Cause.
(e) Termination by Employee for Good Reason. The Employee shall have
---------------------------------------
the right at any time to terminate the Employee's employment hereunder by
written notice to the Company upon the occurrence of any of the following
events, which event continues for 30 days subsequent to such notice:
(i) a material reduction of the Employee's duties, responsibilities
and authority from those described in Section 1;
(ii) a required relocation of the Employee to a principal place of
business more than 100 miles from the Employee's principal place of
business on the date of this Agreement; or
(iii) the breach by the Company of a material term of this Agreement.
9. Effect of Termination of Employment.
-----------------------------------
(a) With Cause. If the Employee's employment is terminated with Cause
----------
(pursuant to Section 8(b)), all compensation and benefits shall cease at the
time of such termination; provided, however, that the Employee shall be entitled
to continue to participate in the Company's medical benefit plans, at his own
expense, to the extent required by law.
(b) Death or Disability. If the Employee's employment is terminated
-------------------
by the death or disability of the Employee (pursuant to Section 8(c)), all
compensation and benefits shall cease at the time of such death or disability;
provided, however, that the Employee or, in the event of the death of the
Employee, the Employee's estate, shall be entitled to continue to participate in
the Company's medical benefit plans, at his expense or the expense of his
estate, to the extent required by law.
(c) Without Cause or For Good Reason. If the Employee's employment is
--------------------------------
terminated by the Company without Cause (pursuant to Section 8(d)) or for Good
Reason (pursuant to Section 8(e)), then the Employee shall be entitled to the
following benefits in complete discharge of the Company's obligations hereunder:
(i) the Employee's salary specified in Section 4(a) shall continue to
be paid for the duration of the Employment Term; and
(ii) the Employee's additional benefits specified in Section 4(b)
shall terminate at the time of such termination; provided, however, that
the Employee
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<PAGE>
shall be entitled to participate in the Company's medical benefit plans, at
the Company's expense, for the duration of the Employment Term.
(d) Survival. The provisions of Sections 6 and 7 of this Agreement
--------
shall survive the termination of the Employee's employment and the termination
of this Agreement.
10. Insurance. The Company may purchase insurance on the life of the
---------
Employee, and if it does so, the Employee shall cooperate fully by performing
all the requirements of the life insurer which are necessary conditions
precedent to the issuance of the life insurance policy issued by it.
Notwithstanding the foregoing, if at the time of termination for any reason
(other than death), the Company is maintaining a life insurance policy on the
Employee which has a cash surrender value, then to the extent permitted under
such policy the Employee may purchase such policy from the Company by paying to
the Company the cash surrender value thereof.
11. Notice. Any notices required or permitted hereunder shall be in
------
writing and shall be deemed to have been given when personally delivered or when
mailed, certified or registered mail, postage prepaid, to the addresses set
forth above or to such other addresses as the parties may hereafter give notice
provided herein.
12. General.
-------
(a) Prior Agreements. This Agreement supersedes and replaces all
----------------
prior agreements between the Company and the Employee, whether written or oral,
relating to his employment by the Company.
(b) Governing Law. The terms of this Agreement shall be governed by
-------------
the internal laws (and not the law of conflicts) of the Commonwealth of
Massachusetts.
(c) Assignability. The Employee may not assign his interest in or
-------------
delegate his duties under this Agreement. The covenants and obligations of the
Employee hereunder shall redound to the benefit of the Company's successors and
assigns.
(d) Binding Effect. This Agreement shall be binding upon and inure to
--------------
the benefit of the Company, its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the
-------------------------------
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
--------
Agreement shall continue for so long as any obligations remain under this
Agreement.
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<PAGE>
(g) Specific Performance. The Employee acknowledges that a breach of
--------------------
this Agreement by the Employee will cause irreparable injury to the Company,
that the Company's remedies at law will be inadequate in case of any such
breach, and that the Company will be entitled to preliminary injunctive relief
in case of any such breach.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement the day and year first written above.
LINKAGE, INC.
By:_________________________________
Name:
Title:
EMPLOYEE
____________________________________
Terry L. Maley
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<PAGE>
EXHIBIT E
1999 INCENTIVE PLAN FOR HIGH TECHNOLOGIES' EMPLOYEES
1. Potential Establishment of a Bonus Pool. The Buyer shall establish a
---------------------------------------
"Bonus Pool" for the Company's employees equal to 20% of the Company's unaudited
----------
earnings before income and taxes for the 1999 calendar year ("EBIT"), but only
----
if EBIT divided by net revenues of the Company equals at least 15%. If EBIT
divided by net revenues of the Company equals less than 15%, then the Buyer
shall have no obligation to establish a Bonus Pool or make any distributions
pursuant to paragraph 2 below.
2. Potential Bonus Payments From the Bonus Pool. If the Buyer
--------------------------------------------
establishes a Bonus Pool pursuant to paragraph 1 above, it shall make payments
from such Bonus Pool directly to employees of the Company (the "Bonus
-----
Recipients") in accordance with the written instructions of Richard L. High, who
shall solely decide upon the identity of the Bonus Recipients and the
appropriate allocations in light of his evaluation of each Bonus Recipient. The
parties agree and acknowledge that the amount of the payments that the Buyer
delivers to the Bonus Recipients shall collectively equal and not exceed the
amount of the Bonus Pool. The Buyer shall deliver such payments to the Bonus
Recipients within fifteen (15) days of the later to occur of the determination
of EBIT and receipt of the written instructions from Mr. High.
The parties agree and acknowledge that the 1999 Incentive Plan for High
Technologies' Employees shall be in effect for the 1999 calendar year only.
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<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
LINKAGE SOLUTIONS, INC.
FIRST. The name of the Corporation is:
Linkage Solutions, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 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.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 32,000,000 shares, consisting of
(i) 30,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and (ii) 2,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock").
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the holders
-------
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
------
each share held at all meetings of stockholders. There shall be no cumulative
voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to
1
<PAGE>
vote, irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without
limiting the generality of the foregoing, the resolutions providing for issuance
of any series of Preferred Stock may provide that such series shall be superior
or rank equally or be junior to the Preferred Stock of any other series to the
extent permitted by law. Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
2
<PAGE>
FIFTH. The name and mailing address of the sole incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
Larry R. Carr Linkage, Inc.
One Forbes Road
Lexington, MA 02421
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided that the Board of Directors is expressly
authorized to adopt, amend or repeal the By-laws of the Corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
NINTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
---------------------------------------------------------------
the Corporation. The Corporation shall indemnify each person who was or is a
- ---------------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or
3
<PAGE>
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation), by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan) (all such persons being referred to hereafter as an
"Indemnitee"), or by reason of any action alleged to have been taken or omitted
in such capacity, against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
---------------
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. Notwithstanding anything to the contrary in this Article, except
as set forth in Section 7 below, the Corporation shall not indemnify an
Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the Corporation. Notwithstanding anything to the
contrary in this Article, the Corporation shall not indemnify an Indemnitee to
the extent such Indemnitee is reimbursed from the proceeds of insurance, and in
the event the Corporation makes any indemnification payments to an Indemnitee
and such Indemnitee is subsequently reimbursed from the proceeds of insurance,
such Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless
4
<PAGE>
and only to the extent that the Court of Chancery of Delaware shall determine
upon application that, despite the adjudication of such liability but in view of
all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
------------------------------------------------
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---------------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled,
5
<PAGE>
without the consent of the Indemnitee, to assume the defense of any claim
brought by or in the right of the Corporation or as to which counsel for the
Indemnitee shall have reasonably made the conclusion provided for in clause (ii)
above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in
-------------------
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter; provided,
however, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
-----------------------------
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority
vote of the directors of the Corporation consisting of persons who are not at
that time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation), or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
--------
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or
6
<PAGE>
advancement of expenses under this Article shall be on the Corporation. Neither
the failure of the Corporation to have made a determination prior to the
commencement of such action that indemnification is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 6 that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time
to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
7
<PAGE>
11. Insurance. The Corporation may purchase and maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware is
----------------------
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
ELEVENTH. This Article is inserted for the management of the business and
for the conduct of the affairs of the Corporation.
1. Number of Directors. The number of directors of the Corporation shall
-------------------
not be less than three. The exact number of directors within the limitations
specified in the
8
<PAGE>
preceding sentence shall be fixed from time to time by, or in the manner
provided in, the Corporation's By-laws.
2. Classes of Directors. The Board of Directors shall be and is divided
--------------------
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided from time to time by resolution adopted by the
Board of Directors.
3. Election of Directors. Elections of directors need not be by written
---------------------
ballot except as and to the extent provided in the By-laws of the Corporation.
4. Terms of Office. Each director shall serve for a term ending on the
---------------
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting in 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting in 2001; and each initial director in Class III shall serve for a term
ending on the date of the annual meeting in the year 2002; and provided further,
that the term of each director shall be subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Number of Directors. In the event of any increase or decrease
- ------------------------------------
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any time in
-------------------------
office shall constitute a quorum for the transaction of business. In the event
one or more of the directors shall be disqualified to vote at any meeting, then
the required quorum shall be reduced by one for each director so disqualified,
provided that in no case shall less than one-third of the number of directors
fixed pursuant to Section 1 above constitute a quorum. If at any meeting of the
Board of Directors there shall be less than such a quorum, a majority of those
present may adjourn the meeting from time to time.
9
<PAGE>
Every act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present shall be regarded as the act of
the Board of Directors unless a greater number is required by law, by the By-
laws of the Corporation or by this Certificate of Incorporation.
7. Removal. Directors of the Corporation may be removed only for cause
-------
by the affirmative vote of the holders of at least two-thirds of the shares of
the capital stock of the Corporation issued and outstanding and entitled to
vote.
8. Vacancies. Any vacancy in the Board of Directors, however occurring,
---------
including a vacancy resulting from an enlargement of the size of the Board of
Directors, shall be filled only by a vote of a majority of the directors then in
office, although less than a quorum, or by a sole remaining director. A
director elected to fill a vacancy shall be elected to hold office until the
next election of the class for which such director shall have been chosen,
subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc. Advance
----------------------------------------------------------
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-laws of the Corporation.
10. Amendments to Article. Notwithstanding any other provisions of law,
---------------------
this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article ELEVENTH.
TWELFTH. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provisions of
law, this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article TWELFTH.
THIRTEENTH. Special meetings of stockholders may be called at any time by
only the Chairman of the Board of Directors, the President or the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting. Notwithstanding any other provision of law, this Certificate of
Incorporation or the By-laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the
10
<PAGE>
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article THIRTEENTH.
11
<PAGE>
EXECUTED at Lexington, Massachusetts on March __, 1999.
--------------------------------
Larry R. Carr
Sole Incorporator
12
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
LINKAGE SOLUTIONS, INC.
<PAGE>
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 - Stockholders..................................................................................... 1
1.1 Place of Meetings................................................................................ 1
1.2 Annual Meeting................................................................................... 1
1.3 Special Meetings................................................................................. 1
1.4 Notice of Meetings............................................................................... 1
1.5 Voting List...................................................................................... 2
1.6 Quorum........................................................................................... 2
1.7 Adjournments..................................................................................... 2
1.8 Voting and Proxies............................................................................... 2
1.9 Action at Meeting................................................................................ 2
1.10 Nomination of Directors.......................................................................... 3
1.11 Notice of Business at Annual Meetings............................................................ 3
1.12 Action without Meeting........................................................................... 4
1.13 Organization..................................................................................... 5
ARTICLE 2 - Directors........................................................................................ 6
2.1 General Powers................................................................................... 6
2.2 Number; Election and Qualification............................................................... 6
2.3 Classes of Directors............................................................................. 6
2.4 Terms of Office.................................................................................. 6
2.5 Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors............................................................. 6
2.6 Vacancies........................................................................................ 7
2.7 Resignation...................................................................................... 7
2.8 Regular Meetings................................................................................. 7
2.9 Special Meetings................................................................................. 7
2.10 Notice of Special Meetings....................................................................... 7
2.11 Meetings by Telephone Conference Calls........................................................... 8
2.12 Quorum........................................................................................... 8
2.13 Action at Meeting................................................................................ 8
2.14 Action by Consent................................................................................ 8
2.15 Removal.......................................................................................... 8
2.16 Committees....................................................................................... 8
2.17 Compensation of Directors........................................................................ 9
ARTICLE 3 - Officers......................................................................................... 9
3.1 Enumeration...................................................................................... 9
3.2 Election......................................................................................... 9
3.3 Qualification.................................................................................... 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.4 Tenure........................................................................................... 9
3.5 Resignation and Removal.......................................................................... 9
3.6 Vacancies........................................................................................ 10
3.7 Chairman of the Board and Vice Chairman of the Board............................................. 10
3.8 President........................................................................................ 10
3.9 Vice Presidents.................................................................................. 10
3.10 Secretary and Assistant Secretaries.............................................................. 10
3.11 Treasurer and Assistant Treasurers............................................................... 11
3.12 Salaries......................................................................................... 11
ARTICLE 4 - Capital Stock.................................................................................... 12
4.1 Issuance of Stock................................................................................ 12
4.2 Certificates of Stock............................................................................ 12
4.3 Transfers........................................................................................ 12
4.4 Lost, Stolen or Destroyed Certificates........................................................... 12
4.5 Record Date...................................................................................... 13
ARTICLE 5 - General Provisions............................................................................... 13
5.1 Fiscal Year...................................................................................... 13
5.2 Corporate Seal................................................................................... 13
5.3 Waiver of Notice................................................................................. 13
5.4 Voting of Securities............................................................................. 13
5.5 Evidence of Authority............................................................................ 14
5.6 Certificate of Incorporation..................................................................... 14
5.7 Transactions with Interested Parties............................................................. 14
5.8 Severability..................................................................................... 14
5.9 Pronouns......................................................................................... 15
ARTICLE 6 - Amendments....................................................................................... 15
6.1 By the Board of Directors........................................................................ 15
6.2 By the Stockholders.............................................................................. 15
6.3 Certain Provisions............................................................................... 15
</TABLE>
ii
<PAGE>
BY-LAWS
OF
LINKAGE SOLUTIONS, INC.
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held
-----------------
at such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the
--------------
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held within six months after the
end of each fiscal year of the corporation on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be
----------------
called at any time by the Chairman of the Board of Directors, the President or
the Board of Directors. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law,
------------------
written notice of each meeting of stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notices of all
meetings shall state the place, date and hour of the meeting. The notice of a
special meeting shall state, in addition, the purpose or purposes for which the
meeting is called. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at the stockholder's
address as it appears on the records of the corporation.
<PAGE>
1.5 Voting List. The officer who has charge of the stock ledger of
-----------
the corporation shall prepare, at least 10 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
10 days prior to the meeting, at a place within the city 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 of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
------
Incorporation or these By-laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to
------------
any other time and to any other place at which a meeting of stockholders may be
held under these By-laws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for
------------------
each share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these By-laws. Each stockholder of record entitled to vote at
a meeting of stockholders, or to express consent or dissent to corporate action
in writing without a meeting, may vote or express such consent or dissent in
person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
-----------------
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and
2
<PAGE>
voting on a matter) shall decide any matter to be voted upon by the stockholders
at such meeting, except when a different vote is required by express provision
of law, the Certificate of Incorporation or these By-laws. Any election by
stockholders shall be determined by a plurality of the votes cast by the
stockholders entitled to vote at the election.
1.10 Nomination of Directors. Only persons who are nominated in
-----------------------
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the Board of Directors of the corporation
at a meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
1.10. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary, and received not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary not later than the close of business on the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice shall set forth (a) as
to each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve as a director if elected); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder and (ii) the class and number of shares of the
corporation which are beneficially owned by such stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
1.11 Notice of Business at Annual Meetings. At an annual meeting of
-------------------------------------
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting
3
<PAGE>
by or at the direction of the Board of Directors, or (c) otherwise properly
brought before an annual meeting by a stockholder. For business to be properly
brought before an annual meeting by a stockholder, if such business relates to
the election of directors of the corporation, the procedures in Section 1.10
must be complied with. If such business relates to any other matter, the
stockholder must have given timely notice thereof in writing to the Secretary.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the date on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever occurs first. A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (a) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
Notwithstanding anything in these By-laws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this Section 1.11 and except that any stockholder proposal which
complies with Rule 14a-8 of the proxy rules (or any successor provision)
promulgated under the Securities Exchange Act of 1934, as amended, and is to be
included in the corporation's proxy statement for an annual meeting of
stockholders shall be deemed to comply with the requirements of this Section
1.11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 1.11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
1.12 Action without Meeting. Unless otherwise provided in the
----------------------
Certificate of Incorporation, any action required or permitted to be taken by
stockholders for or in connection with any corporate action may be taken without
a meeting, without prior notice and without a vote, if a consent or consents 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 and shall be delivered to the
corporation by delivery to its registered office in Delaware by hand or
certified or registered mail, return receipt requested, to its principal place
of business or to an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Each such
written consent shall
4
<PAGE>
bear the date of signature of each stockholder who signs the consent. No written
consent shall be effective to take the corporate action referred to therein
unless written consents signed by a number of stockholders sufficient to take
such action are delivered to the corporation in the manner specified in this
paragraph within sixty days of the earliest dated consent so delivered.
If action is taken by consent of stockholders and in accordance with the
foregoing, there shall be filed with the records of the meetings of stockholders
the writing or writings comprising such consent.
If action is taken by less than unanimous consent of stockholders, prompt
notice of the taking of such action without a meeting shall be given to those
who have not consented in writing and a certificate signed and attested to by
the Secretary of the corporation that such notice was given shall be filed with
the records of the meetings of stockholders.
In the event that the action which is consented to is such as would have
required the filing of a certificate under any provision of the General
Corporation Law of the State of Delaware, if such action had been voted upon by
the stockholders at a meeting thereof, the certificate filed under such
provision shall state, in lieu of any statement required by such provision
concerning a vote of stockholders, that written consent has been given under
Section 228 of said General Corporation Law and that written notice has been
given as provided in such Section 228.
Notwithstanding the foregoing, if at any time the corporation shall have a
class of stock registered pursuant to the provisions of the Securities Exchange
Act of 1934, as amended, for so long as such class is registered, any action by
the stockholders of such class must be taken at an annual or special meeting of
stockholders and may not be taken by written consent.
1.13 Organization. The Chairman of the Board, or in his absence the
------------
Vice Chairman of the Board designated by the Chairman of the Board, or the
President, in the order named, shall call meetings of the stockholders to order,
and shall act as chairman of such meeting; provided, however, that the Board of
Directors may appoint any stockholder to act as chairman of any meeting in the
absence of the Chairman of the Board. The Secretary of the corporation shall
act as secretary at all meetings of the stockholders; but in the absence of the
Secretary at any meeting of the stockholders, the presiding officer may appoint
any person to act as secretary of the meeting.
5
<PAGE>
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the corporation
--------------
shall be managed by or under the direction of a Board of Directors, who may
exercise all of the powers of the corporation except as otherwise provided by
law, the Certificate of Incorporation or these By-laws. 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 until the vacancy is
filled.
2.2 Number; Election and Qualification. The number of directors
----------------------------------
which shall constitute the whole Board of Directors shall be determined by
resolution of the Board of Directors, but in no event shall be less than three.
The number of directors may be decreased at any time and from time to time by a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of the death, resignation, removal or expiration of the term
of one or more directors. The directors shall be elected at the annual meeting
of stockholders by such stockholders as have the right to vote on such election.
Directors need not be stockholders of the corporation.
2.3 Classes of Directors. The Board of Directors shall be and is
--------------------
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
2.4 Terms of Office. Each director shall serve for a term ending
---------------
on the date of the third annual meeting following the annual meeting at which
such director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting of stockholders in
2000; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 2001; and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 2002; and provided further, that the term of each director shall
be subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
2.5 Allocation of Directors Among Classes in the Event of Increases
---------------------------------------------------------------
or Decreases in the Number of Directors. In the event of any increase or
- ---------------------------------------
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which he is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors among
the three classes of directors so as to ensure that no one
6
<PAGE>
class has more than one director more than any other class. To the extent
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
latest dates following such allocation, and any newly eliminated directorships
shall be subtracted from those classes whose terms of offices are to expire at
the earliest dates following such allocation, unless otherwise provided from
time to time by resolution adopted by the Board of Directors.
2.6 Vacancies. Any vacancy in the Board of Directors, however
---------
occurring, including a vacancy resulting from an enlargement of the size of the
Board, shall be filled only by vote of a majority of the directors then in
office, although less than a quorum, or by a sole remaining director. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office, and a director chosen to fill a position resulting from
an increase in the number of directors shall hold office until the next election
of the class for which such director shall have been chosen, subject to the
election and qualification of his successor and to his earlier death,
resignation or removal.
2.7 Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the President or
Secretary. 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.
2.8 Regular Meetings. Regular meetings of the Board of Directors
----------------
may be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any director who is absent when such a determination is
made shall be given notice of the determination. A regular meeting of the Board
of Directors may be held without notice immediately after and at the same place
as the annual meeting of stockholders.
2.9 Special Meetings. Special meetings of the Board of Directors
----------------
may be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board, President, two or more
directors, or by one director in the event that there is only a single director
in office.
2.10 Notice of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy,
telex or electronic mail message, or delivering written notice by hand, to his
last known business or home address at least 24 hours in advance of the meeting,
or (iii) by mailing written notice to his last known business or home address at
least 72 hours in advance of the meeting. A notice or waiver of notice of a
meeting of the Board of Directors need not specify the purposes of the meeting.
7
<PAGE>
2.11 Meetings by Telephone Conference Calls. Directors or any
--------------------------------------
members of any committee designated by the directors may participate in a
meeting of the Board of Directors or such 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 participation by such
means shall constitute presence in person at such meeting.
2.12 Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.13 Action at Meeting. At any meeting of the Board of Directors at
-----------------
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-laws.
2.14 Action by Consent. Any action required or permitted to be taken
-----------------
at any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.15 Removal. Directors of the corporation may be removed only for
-------
cause by the affirmative vote of the holders of two-thirds of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote.
2.16 Committees. The Board of Directors may 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 of the committee 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. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, 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.
8
<PAGE>
Each such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these By-laws for the Board of Directors.
2.17 Compensation of Directors. Directors may be paid such
-------------------------
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the corporation shall consist of a
-----------
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be
--------
elected annually by the Board of Directors at its first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or
-------------
more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the
------
Certificate Incorporation or by these By-laws, each officer shall hold office
until his successor is elected and qualified, unless a different term is
specified in the vote choosing or appointing him, or until his earlier death,
resignation or removal.
3.5 Resignation and Removal. Any officer may resign by delivering
-----------------------
his written resignation to the corporation at its principal office or to the
President or Secretary. 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.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
9
<PAGE>
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy
---------
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
3.7 Chairman of the Board and Vice Chairman of the Board. The
----------------------------------------------------
Board of Directors may appoint a Chairman of the Board. If the Board of
Directors appoints a Chairman of the Board, he shall perform such duties and
possess such powers as are assigned to him by the Board of Directors. If the
Board of Directors appoints a Vice Chairman of the Board, he shall, in the
absence or disability of the Chairman of the Board, perform the duties and
exercise the powers of the Chairman of the Board and shall perform such other
duties and possess such other powers as may from time to time be vested in him
by the Board of Directors.
3.8 President. The President shall, subject to the direction of
---------
the Board of Directors, have general charge and supervision of the business of
the corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties
---------------
and possess such powers as the Board of Directors or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
perform such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the
10
<PAGE>
duty and power to give notices of all meetings of stockholders and special
meetings of the Board of Directors, to attend all meetings of stockholders and
the Board of Directors and keep a record of the proceedings, to maintain a stock
ledger and prepare lists of stockholders and their addresses as required, to be
custodian of corporate records and the corporate seal and to affix and attest to
the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform
----------------------------------
such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the President. In addition, the Treasurer
shall perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
11
<PAGE>
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders
-----------------
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
corporation or the whole or any part of any unissued balance of the authorized
capital stock of the corporation held in its treasury may be issued, sold,
transferred or otherwise disposed of by vote of the Board of Directors in such
manner, for such consideration and on such terms as the Board of Directors may
determine.
4.2 Certificates of Stock. Every holder of stock of the
---------------------
corporation shall be entitled to have a certificate, in such form as may be
prescribed by law and by the Board of Directors, certifying the number and class
of shares owned by him in the corporation. Each such certificate shall be signed
by, or in the name of the corporation by, the Chairman or Vice Chairman, if any,
of the Board of Directors, or the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-laws,
applicable securities laws or any agreement among any number of stockholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and
---------
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the corporation by the
surrender to the corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation 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 to such stock, 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.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may is
--------------------------------------
a new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or
12
<PAGE>
destruction and the giving of such indemnity as the Board of Directors may
require for the protection of the corporation or any transfer agent or
registrar.
4.5 Record Date. The Board of Directors may fix in advance a date
-----------
as a record date for the determination of the stockholders entitled to notice of
or to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, 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 before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. 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 to such purpose.
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.
ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. Except as from time to time otherwise designated
-----------
by the Board of Directors, the fiscal year of the corporation shall begin on the
first day of January in each year and end on the last day of December in each
year.
5.2 Corporate Seal. The corporate seal shall be in such form as
--------------
shall be approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required
----------------
to be given by law, by the Certificate of Incorporation or by these By-laws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise
--------------------
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons
13
<PAGE>
to act as, proxy or attorney-in-fact for this corporation (with or without power
of substitution) at, any meeting of stockholders or shareholders of any other
corporation or organization, the securities of which may be held by this
corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these By-laws
----------------------------
to the Certificate of Incorporation shall be deemed to refer to the Certificate
of Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or
------------------------------------
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation, partnership,
association or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the contract or transaction
or solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
5.8 Severability. Any determination that any provision of these
------------
By-laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-laws.
14
<PAGE>
5.9 Pronouns. All pronouns used in these By-laws shall be deemed
--------
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
ARTICLE 6 - Amendments
----------------------
6.1 By the Board of Directors. These By-laws may be altered,
-------------------------
amended or repealed or new by-laws may be adopted by the affirmative vote of a
majority of the directors present at any regular or special meeting of the Board
of Directors at which a quorum is present.
6.2 By the Stockholders. Except as otherwise provided in Section
-------------------
6.3, these By-laws may be altered, amended or repealed or new by-laws may be
adopted by the affirmative vote of the holders of a majority of the shares of
the capital stock of the corporation issued and outstanding and entitled to vote
at any regular or special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such regular or special meeting.
6.3 Certain Provisions. Notwithstanding any other provision of law,
------------------
the Certificate of Incorporation or these By-laws, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of the capital
stock of the corporation issued and outstanding and entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with Section
1.3, Section 1.10, Section 1.11, Section 1.12, Section 1.13, Article 2 or
Article 6 of these By-laws.
15
<PAGE>
Exhibit 10.1
LINKAGE, INC.
1995 STOCK OPTION PLAN
ARTICLE I
Purpose of the Plan
The purpose of this Plan is to encourage and enable employees, consultants,
directors and others who are in a position to make significant contributions to
the success of LINKAGE, INC. (and its affiliated corporations) and upon whose
judgment, initiative and efforts the Company depends for the successful conduct
of its business and affairs, to acquire a closer identification of their
interests with those of the Company by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder, thereby
recognizing their efforts on behalf of the Company and strengthening their
desire to remain actively involved with the Company.
ARTICLE II
Definitions
2.1 "Affiliated Company" means any stock company of which a majority of
the voting common or capital stock is owned directly or indirectly by the
Company.
2.2 "Award" means an Option granted under Article V.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from time
to time and the Regulations promulgated thereunder.
2.5 "Company" means LINKAGE, INC., a Massachusetts company, or its
successor, and its Affiliated Companies.
2.6 "Employee" means any person who is a regular full-time or part-time
employee of the Company on or after January 1, 1996.
2.7 "Option" means a Non-Qualified Option granted by the Board under
Article V of this Plan in the form of a right to purchase Stock evidenced by
an instrument containing such provisions as the Board may from time to time
establish.
2.8 "Plan" means this 1995 Stock Option Plan.
2.9 "Non-Qualified Option" means any option not intended to qualify as an
incentive stock option as defined in Section 422A of the Code.
-1-
<PAGE>
2.10 "Stock" means the common stock without par value of the Company
including any adjustments thereto resulting from changes in or to the capital
structure of the Company of the type described in Article X of the Plan.
ARTICLE III
Administration of the Plan
3.1 Administration by Board. This Plan shall be administered by the Board
-----------------------
of Directors of the Company. The Board may, from time to time, delegate any of
its administrative functions under this Plan to one or more committees. From
time to time, the Board may increase the size of the committee or committees and
appoint additional members thereto, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies however caused,
or remove all members of the committee or committees and thereafter
directly administer the Plan. All references in this Plan to the "Board" shall
also include such committee or committees, if one or more have been appointed by
the Board. No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any options granted
under it.
3.2 Powers. The Board shall have full and final authority to operate,
------
manage and administer the Plan on behalf of the Company. This authority shall
include, but not be limited to, the following powers:
(a) To grant Awards, conditionally or unconditionally,
(b) To prescribe the form or forms of the instruments evidencing
Awards granted under this Plan,
(c) To interpret the Plan,
(d) To provide regulations for the operation of the Plan, and otherwise
to prescribe and rescind regulations for interpretation, management
and administration of the Plan,
(e) To delegate responsibility for Plan operation, management and
administration on such terms, consistent with the Plan, as the Board
may from time to time establish,
(f) To delegate to other persons the responsibility of performing
administrative acts in furtherance of the Plan's purpose, and
-2-
<PAGE>
(g) To engage the services of persons, companies, or organizations
in furtherance of the Plan's purpose, including but not limited to,
banks, insurance companies, brokerage firms and consultants.
3.3 Additional Powers. In addition, as to each Option to buy Stock of the
-----------------
Company, the Board shall have full and final authority in its discretion: (a)
to determine the number of shares of Stock subject to each Option; (b) to
determine the time or times at which Options will be granted; (c) to determine
the option price of the shares of Stock subject to each Option; and, (d) to
determine the time or times when each Option shall become exercisable
and the duration of the exercise period.
ARTICLE IV
Eligibility
4.1 Eligible Employees. All Employees (including Directors who are
------------------
Employees) are eligible to be granted Awards under this Plan.
4.2 Consultants, Directors and other Non-Employees. Any consultant,
----------------------------------------------
Director (whether or not an Employee) and any other non-Employee is eligible to
be granted Non-Qualified Option Awards under the Plan.
4.3 Relevant Factors. In selecting individual Employees, consultants,
----------------
Directors and other non-Employees to whom Awards shall be granted, the Board
shall weight such factors as are relevant to accomplish the purpose of the Plan
as stated in Article I. An individual who has previously been granted an Award
may be granted one or more additional Awards, if the Board so determines. The
granting of an Award to any individual shall neither entitle that individual to
nor disqualify him from participation in any other grant of Awards.
ARTICLE V
Stock Option Awards
5.1 Number of Shares. Subject to the provisions of Article IX of this
----------------
Plan, the aggregate number of shares of Stock for which Options may be granted
under this Plan shall not exceed five thousand (5,000) shares. The shares to be
delivered upon exercise of Options under this Plan shall be made available, at
the discretion of the Board, either from authorized but unissued shares or from
previously issued and reacquired shares of Stock held by the Company as treasury
shares, including shares purchased in the open market.
-3-
<PAGE>
Stock issuable upon exercise of an Option granted under the Plan shall be
subject to whatever restrictions, whether relating to transfer, repurchase
rights or otherwise, shall be determined by the Board.
5.2 Effect of Expiration, Termination or Surrender. If an Option under
----------------------------------------------
this Plan shall expire or terminate unexercised as to any shares of Stock
covered thereby, or shall cease for any reason to be exercisable in whole or in
part, or if the Company shall reacquire any unvested shares issued pursuant to
Options under the Plan, such shares shall thereafter be available for the
granting of other Options under this Plan.
5.3 Terms of Options. The full term of each Option granted hereunder
----------------
shall be for such period as the Board shall determine. Each Option shall be
subject to earlier termination as provided in Sections 6.3 and 6.4.
5.4 Option Price. The Option price shall be determined by the Board at
------------
the time any Option is granted.
5.5 Non-Transferability of Options. No Option granted under this Plan
------------------------------
shall be transferable by the grantee otherwise than by will or the laws of
descent and distribution, and such Option may be exercised during the grantee's
lifetime only by the grantee.
ARTICLE VI
Exercise of Option
6.1 Exercise. Each Option granted under this Plan shall be exercisable on
--------
such date or dates and during such period and for such number of shares of Stock
as shall be determined pursuant to the provisions of the instrument evidencing
such Option. The Board shall have the right to accelerate the date of exercise
of any Option.
6.2 Notice of Exercise. A person electing to exercise an Option shall
------------------
give written notice to the Company of such election and of the number of shares
he or she has elected to purchase and shall at the time of exercise tender the
full purchase price of the shares of Stock he or she elected to purchase. Until
such person has been issued a certificate or certificates for the shares so
purchased, he or she shall possess no rights of a record holder with respect to
any of such shares.
6.3 Option Unaffected by Change in Duties. No Option granted to a person
-------------------------------------
who is, on the date of the grant, an Employee of the Company shall be affected
by any change of duties or position of the optionee (including transfer to or
from an Affiliated Company), so long as he or she continues to be an Employee.
Employment shall be considered as continuing uninterrupted during any bona fide
---------
leave of absence (such as those attributable to maternity, illness, military
obligations or governmental service);
-4-
<PAGE>
provided that the period of such leave does not exceed ninety (90) days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written
---------
approval of the Board shall not be considered an interruption of employment,
provided that such written approval contractually obligates the Company to
continue the employment of the optionee after the approved period of absence.
If the optionee shall cease to be an Employee for any reason other than
death, such Option shall thereafter be exercisable only to the extent of the
purchase rights thereunder, if any, which have accrued as of the date of such
cessation of employment; provided that (i) the Board may provide in the
instrument evidencing any Option that the Board may in its absolute discretion,
upon any such cessation of employment, determine (but be under no obligation to
determine) that such accrued purchase rights shall be deemed to include
additional shares covered by such Option; and (ii) unless the Board shall
otherwise provide in the instrument evidencing any Option, upon any such
cessation of employment, such remaining rights to purchase shall in any event
terminate upon the earlier of (a) the expiration of the original term of the
Option; or (b) where such cessation of employment is on account of disability,
the later of such cessation of employment or final determination of
disability. For purposes of this Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section 22(e) (3) of the Code.
6.4 Death of Optionee. Should an optionee die while in possession of the
-----------------
legal right to exercise an Option, such person or persons as shall have
acquired, by will or by the laws of descent and distribution, the right to
exercise any Options theretofore granted, may, unless otherwise provided by
the Board in any instrument evidencing such Option, exercise such Option at any
time prior to six (6) months from the date of death; provided, that such Option
shall expire in any event not later than the last day of the original term of
such Option; provided, further, that any such exercise shall be limited to the
purchase rights which have accrued as of the date when the optionee ceased to be
an Employee, whether by death or otherwise, unless the Board provides in the
instrument evidencing such Option that, in the discretion of the Board,
additional shares covered by such Option may become subject to purchase
immediately upon the death of the optionee.
ARTICLE VII
Terms and Conditions of Options
Options shall be evidenced by instruments (which need not be identical) in
such forms as the Board may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in Articles V and VI hereof and
may contain such other provisions as the Board deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of Stock
issuable upon exercise of Options.
-5-
<PAGE>
In granting any Option, the Board may specify that such Option shall be subject
to termination and cancellation provisions as the Board may determine. The Board
may from time to time confer authority and responsibility on one or more of its
own members and/or one or more officers of the Company to execute and deliver
such instruments. The proper officers of the Company are authorized and directed
to take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
ARTICLE VIII
Benefit Plans
Awards under the Plan are discretionary and are not a part of regular
salary. Awards may not be used in determining the amount of compensation for any
purpose under any benefit plans of the Company, except as the Board may from
time to time expressly provide. Neither the Plan, an Option or any instrument
evidencing an Option confers upon any Employee the right to continued
employment with the Company.
ARTICLE IX
Amendment, Suspension or Termination of the Plan
The Board may suspend the Plan or any part thereof at any time or may
terminate the Plan in its entirety. Awards shall not be granted after Plan
termination.
The Board may also amend the Plan from time to time, except that amendments
which affect the following subjects must be approved by stockholders of the
Company:
(a) Except as provided in Article X relative to capital changes, the
number of shares as to which Options may be granted pursuant to
Article V;
(b) The maximum term of Options granted;
(c) The minimum price at which Options may be granted;
(d) The term of the Plan; and
(e) The requirements as to eligibility for participation in the Plan.
Awards granted prior to suspension or termination of the Plan may not be
cancelled solely because of such suspension or termination, except with the
consent of the grantee of the Award.
-6-
<PAGE>
ARTICLE X
Changes in Capital Structure
The number of shares of Stock subject to an Option granted hereunder shall
be subject to adjustment in the event of changes in the outstanding Stock of the
Company by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or dividends
payable in stock of the same class or issuance of rights to subscribe to stock
of the same class, or other relevant changes in the capital structure of the
Company occurring after the date of an Award to the same extent as would affect
an actual share of Stock issued and outstanding on the effective date of any
such change. Such adjustment to an outstanding Option shall be made without
change in the total price applicable to the unexercised portion of such Option,
and a corresponding adjustment in the applicable option price per share shall be
made. In the event of any such change, the aggregate number and classes of
shares for which Options may thereafter be granted under Section 5.1 of this
Plan may be appropriately adjusted as determined by the Board so as to reflect
such change.
In the event of the proposed dissolution or liquidation of the Company,
each Option will terminate immediately prior to the consummation of such
proposed action or at such other time and subject to such other conditions as
shall be determined by the Board.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Company.
No fractional shares shall be issued under the Plan.
ARTICLE XI
Effective Date and Terms of the Plan
The Plan shall become effective on December __, 1995. The Plan shall
continue until such time as it may be terminated by action of the Board.
ARTICLE XII
Application of Funds
The proceeds received by the Company from the sale of shares pursuant to
Options granted under the Plan shall be used for general Company purposes.
-7-
<PAGE>
ARTICLE XIII
Governmental Regulation
The Company's obligation to sell and deliver shares of Stock under this
Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
ARTICLE XIV
Withholding of Additional Income Taxes
Upon the exercise of a Option, the Company, in accordance with Section
3402(a) of the Code, may require the optionee to pay additional withholding
taxes in respect to the amount that is considered compensation includible in
such person's gross income. The Board in its discretion may condition the
exercise of an Option on the payment of such additional withholding taxes.
ARTICLE XV
Governing Law; Construction
The validity and construction of the Plan and the instruments evidencing
Options shall be governed by the laws of the Commonwealth of Massachusetts. In
construing this Plan, the singular shall include the plural and the masculine
gender shall include the feminine and neuter, unless the context otherwise
requires.
-8-
<PAGE>
FOR IDENTIFICATION
------------------
PURPOSES ONLY
-------------
Optionee:
B.D. App'd:
S.H. App'd:
No. of Shares:
Purchase Price:
NON-QUALIFIED STOCK OPTION TO PURCHASE
--------------------------------------
SHARES OF COMMON STOCK
----------------------
OF
--
LINKAGE, INC.
-------------
Date of Grant:
Agreement made this day of , 1996, by and
between LINKAGE, INC., a Massachusetts Corporation having its principal place of
business in Lexington, Massachusetts ("Company"), and _______________________,
of ____________________, Massachusetts ("Optionee")
WHEREAS, the Company wishes to afford the Optionee an opportunity to
acquire a proprietary interest in the Company, as an added incentive to continue
to advance the interests of the Company, by granting the Optionee an option to
purchase shares of the common stock without par value ("Stock"), in accordance
with the 1995 Stock Option Plan adopted and approved by the Board of Directors
and the Shareholders of the Company on December , 1995, and December , 1995,
respectively. A copy of the Stock Option Plan is attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the within premises, it is agreed by
and between the parties as follows:
1. Grant of Option. The Company hereby grants to the Optionee an option
---------------
to purchase ("Option"), subject to certain limitations, all or any part of
______ shares (together with any stock into which or for which such shares may
be changed or exchanged pursuant to Paragraph 6 hereof, the "Shares") of its
Stock at the purchase price of $ ______ per share, in the manner and subject to
the conditions hereinafter provided. The Grant of this Option is subject to the
terms and conditions of the 1995 Stock Option Plan in all respects, except as
otherwise provided for herein.
-9-
<PAGE>
2. Time of Exercise of Option. The Option may be exercised at any time
--------------------------
as to all or any part of the Shares, and from time to time, within _________
(__) months of the Date of Grant or until the termination thereof as provided in
Paragraph 5 below.
3. Method of Exercise. This Option may be exercised by the Optionee's
------------------
giving written notice on one or more separate occasions directed to the Company,
at the Company's principal place of business or as otherwise directed by the
Company, specifying the number of shares being purchased and accompanied by a
bank or certified check in full payment of the option price for the number of
shares specified. Unless the sale of Shares to the Optionee pursuant to this
Option shall be registered under the Securities Act of 1933, as amended ("Act"),
the Optionee shall be required at the time of exercise to furnish to the Company
a written representation in a form approved by the Company of his intention to
purchase such Shares for investment and not with a view to or for sale in
connection with any distribution thereof in violation of any federal or state
securities laws. In the event that the sale of such Shares to the Optionee
shall be registered under the Act, such investment representation need not be
furnished. In the event that the Shares transferred to the Optionee pursuant to
this Option are subsequently registered under the Act, for resale by the
Optionee, such investment representation shall automatically be deemed not to be
in effect and any restriction on transfer of such Shares shall thereupon
terminate. Certificates for the Shares purchased may be issued in the name of
the Optionee, in the name of the Optionee jointly with another person with right
of survivorship, in the name of the executor or administrator of the estate of
the Optionee. No certificates will be issued until the Company has completed
all action required by law to be taken in connection with the issue of the
Shares. Certificates evidencing Shares issued upon exercise of this Option
(other than Shares which shall have been sold or transferred pursuant to an
effective registration under the Act) will bear a legend substantially in the
following form until such time as the Company's counsel determines that such
legend is no longer necessary or advisable:
"The Shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not
be sold or transferred except pursuant to an effective registration
statement under that Act or after receipt of an opinion of counsel
satisfactory in form and substance to the Company that such
registration is not required."
Appropriate stop-transfer orders will be noted on the Company's stock records
with respect to all Shares so legended.
The Company shall make or cause to be made immediate delivery of the Shares
being purchased, provided that if any law or regulation requires the Company to
take any action with respect to the shares specified in such notice before the
issuance thereof, then the date of delivery of such shares shall be extended for
the period necessary to
-10-
<PAGE>
take such action. At the time of exercise, this Option shall be presented to the
Company for cancellation, or, if exercised in part, for notation as the extent
of such exercise.
4. Stock Restriction Agreement. Shares purchased by the Optionee by
---------------------------
exercising this Option shall be subject to the restrictions contained in a
"Shareholders Agreement" substantially in the form attached hereto as Exhibit A,
and immediately upon exercise of any part of this Option, the Optionee shall
either become a party to such agreement in the manner specified therein or
execute a "Shareholders Agreement" as presented by the Company's Board of
Directors.
5. Termination of Option. Except as otherwise stated herein or
---------------------
determined by the Company's Board of Directors, this Option, if and to the
extent the Optionee was then entitled to exercise it, shall terminate upon the
first to occur of the following dates:
(a) The date on which the Optionee's employment by the Company is
terminated for whatever reason (except if such termination is by
reason of death or permanent disability as below provided;
(b) The later of termination of employment or final determination of
disability (For purposes hereof, the term "disability" shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended;
(c) The expiration of six (6) months of the date of the Optionee's death;
or,
(d) ____________________, 199_ (being the expiration of __________ (__)
months from the Date of Grant of this Option).
6. Change in Capital Structure. This Option shall be subject to
---------------------------
adjustment in the event of changes in the outstanding Stock of the Company by
reason of stock dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges, or dividends payable in stock
of the same class or issuance of rights to subscribe to stock of the same class,
or other relevant changes in the capital structure occurring after the Date of
Grant of this Option to the same extent as would affect an actual share of Stock
issued and outstanding on the effective date of such change. Such adjustment
shall be made without change in the total price applicable to the unexercised
portion of such Options, and a corresponding adjustment in the application
purchase price per share shall be made.
7. Shares Fully Paid When Issued. All Shares of the Company which may be
-----------------------------
issued upon the exercise of this Option will, upon issuance, be fully paid and
nonassessable. During the period within which the rights represented by this
Option may be exercised, the Company will at all times have authorized and
reserved for the
-11-
<PAGE>
purpose of issue upon exercise of the rights evidenced hereby a sufficient
number of shares of its Stock to provide for the exercise of such rights.
8. Dissolution; Liquidation. In the event of the dissolution or
------------------------
liquidation of the Company, this Option will terminate immediately prior to the
consummation of such proposed action or at such other time and subject to such
other conditions as shall be determined by the Board of Directors of the
Company.
9. Rights Prior to Exercise of Option. This Option is not assignable and
----------------------------------
nontransferable by the Optionee, except in the event of his death (whereupon,
all rights hereunder shall be exercisable, subject to the terms hereof, by such
person or persons as shall have acquired them pursuant to will or applicable
laws of descent and distribution), and during his lifetime is exercisable only
by him. The Employee shall have no rights as a shareholder of the Company with
respect to the option shares until payment in full of the option price and
delivery to him of such Shares, as herein provided.
10. Restrictions on Transfer, Disposition. All Shares acquired by the
-------------------------------------
Employee pursuant to this Stock Option Agreement shall be subject to the
restrictions on sale, encumbrance and other disposition contained in a
Shareholders Agreement by and between the Company and the Optionee which the
Optionee agrees to become a party thereto upon exercise of this Option. The
form and substance of such a Shareholders Agreement shall be as presented to the
Optionee at the time of and as a condition to exercise of this Option.
Additionally, the Optionee represents and warrants that he is acquiring and will
hold this Option for investment and not with a view to any distribution thereof
in violation of any federal or state securities laws.
11. Binding Effect. This Option shall inure to the benefit of and be
--------------
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns. It may be assigned by the Company.
12. Notices and Communications. Notices and communications hereunder
--------------------------
shall be delivered to the Company at its principal place of business in
Lexington, Massachusetts, to the attention of Larry R. Carr, its Senior Vice-
President and shall be mailed to the Optionee at _____________________, or such
other address as he or she may subsequently provide the Company in writing.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed in the day and year first above written.
LINKAGE, INC.
-12-
<PAGE>
By: ______________________________
Philip J. Harkins,
Its President
The foregoing Option is hereby accepted and the terms thereof hereby agreed
to:
________________________________
-13-
<PAGE>
Exhibit 10.2
LINKAGE SOLUTIONS, INC.
1999 STOCK INCENTIVE PLAN
1. Purpose
-------
The purpose of this 1999 Stock Incentive Plan (the "Plan") of Linkage
Solutions, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporations of Linkage Solutions, Inc. as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder (the "Code").
2. Eligibility
-----------
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock or other stock-
based awards (each, an "Award") under the Plan. Any person who has been granted
an Award under the Plan shall be deemed a "Participant."
3. Administration, Delegation
--------------------------
a. Administration by Board of Directors. The Plan will be administered
------------------------------------
by the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
b. Delegation to Executive Officers. To the extent permitted by
--------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
<PAGE>
c. Appointment of Committees. To the extent permitted by applicable law,
-------------------------
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). If and when the
common stock, $.01 par value per share, of the Company (the "Common Stock") is
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Board may appoint one such Committee of not less than two members,
each member of which shall be an "outside director" within the meaning of
Section 162(m) of the Code and a "non-employee director" as defined in Rule 16b-
3 promulgated under the Exchange Act. All references in the Plan to the "Board"
shall mean the Board or a Committee of the Board or the executive officer
referred to in Section 3(b) to the extent that the Board's powers or authority
under the Plan have been delegated to such Committee or executive officer.
4. Stock Available for Awards
--------------------------
a. Number of Shares. Subject to adjustment under Section 4(c), Awards
----------------
may be made under the Plan for up to 1,500,000 shares of Common Stock. If any
Award expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any Common
Stock not being issued, the unused Common Stock covered by such Award shall
again be available for the grant of Awards under the Plan, subject, however, in
the case of Incentive Stock Options (as hereinafter defined), to any limitation
required under the Code. Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury shares.
b. Per-Participant Limit. Subject to adjustment under Section 4(c), for
---------------------
Awards granted after the Common Stock is registered under the Exchange Act, the
maximum number of shares with respect to which an Award may be granted to any
Participant under the Plan shall be 750,000 per calendar year. The per-
participant limit described in this Section 4(b) shall be construed and applied
consistently with Section 162(m) of the Code.
c. Adjustment to Common Stock. In the event of any stock split, stock
--------------------------
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the per-Participant limit set forth in Section 4(b), (iii)
the number and class of security and exercise price per share subject to each
outstanding Option, (iv) the repurchase price per security subject to each
outstanding Restricted Stock Award, and (v) the terms of each other outstanding
stock-based Award shall be appropriately adjusted by the Company (or substituted
Awards may be made, if applicable) to the extent the Board shall determine, in
good faith, that such an adjustment (or substitution) is necessary and
appropriate. If this Section 4(c)
2
<PAGE>
applies and Section 8(e)(1) also applies to any event, Section 8(e)(1) shall be
applicable to such event, and this Section 4(c) shall not be applicable.
5. Stock Options
-------------
a. General. The Board may grant options to purchase Common Stock (each,
-------
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option."
b. Incentive Stock Options. An Option that the Board intends to be an
-----------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
c. Exercise Price. The Board shall establish the exercise price at the
--------------
time each Option is granted and specify it in the applicable option agreement.
d. Duration of Options. Each Option shall be exercisable at such times
-------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
e. Exercise of Option. Options may be exercised only by delivery to the
------------------
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
f. Payment Upon Exercise. Common Stock purchased upon the exercise of an
----------------------
Option granted under the Plan shall be paid for as follows:
i. in cash or by check, payable to the order of the Company;
ii. except as the Board may otherwise provide in an Option
Agreement, by delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price, or by delivery by the Participant to the Company of a copy
of irrevocable and unconditional instructions to a creditworthy broker to
deliver promptly to the Company cash or a check sufficient to pay the exercise
price;
3
<PAGE>
iii. to the extent permitted by the Board and explicitly provided in
an Option Agreement (i) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant at
least six months prior to such delivery, (ii) by delivery of a promissory note
of the Participant to the Company on terms determined by the Board, or (iii) by
payment of such other lawful consideration as the Board may determine; or
iv. by any combination of the above permitted forms of payment.
6. Restricted Stock
----------------
a. Grants. The Board may grant Awards entitling recipients to acquire
------
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
b. Terms and Conditions. The Board shall determine the terms and
--------------------
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. Other Stock-Based Awards
------------------------
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. General Provisions Applicable to Awards
---------------------------------------
a. Transferability of Awards. Except as the Board may otherwise
-------------------------
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or
4
<PAGE>
otherwise encumbered by the person to whom they are granted, either voluntarily
or by operation of law, except by will or the laws of descent and distribution,
and, during the life of the Participant, shall be exercisable only by the
Participant. References to a Participant, to the extent relevant in the context,
shall include references to authorized transferees.
b. Documentation. Each Award under the Plan shall be evidenced by a
-------------
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
c. Board Discretion. Except as otherwise provided by the Plan, each type
----------------
of Award may be made alone or in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board
need not treat Participants uniformly.
d. Termination of Status. The Board shall determine the effect on an
---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
e. Acquisition Events
------------------
i. Consequences of Acquisition Events. Upon the occurrence of an
-----------------------------------
Acquisition Event (as defined below), each outstanding Option or Award shall be
assumed or an equivalent option or award substituted by the successor
corporation or a parent or subsidiary of the successor corporation, provided
that any such Options substituted for Incentive Stock Options shall satisfy, in
the determination of the Board, the requirements of Section 424(a) of the Code,
unless the successor corporation refuses to assume or substitute for the Option
or Award, in which case (i) the Participant shall have the right to exercise the
Option in full, including with respect to shares of Common Stock as to which it
would not otherwise be exercisable, (ii) all Restricted Stock Awards then
outstanding shall become free of all restrictions prior to the consummation of
the Acquisition Event, and (iii) any other stock-based Awards outstanding shall
become exercisable, realizable or vested in full, or shall be free of all
conditions or restrictions, as applicable to each such Award, prior to the
consummation of the Acquisition Event. If an Option or Award is exercisable in
lieu of assumption or substitution in the event of an Acquisition Event, the
Board shall notify the Participant in writing or electronically that the Option
or Award shall be fully exercisable for a period of not less than forty-five
(45) days from the date of such notice, and the Option or Award shall terminate
upon the expiration of such period.
Each Option or other Award assumed or substituted pursuant to the
immediately preceding paragraph shall include a provision to the effect that
such Option or Award
5
<PAGE>
shall become immediately exercisable (or vested) in full if, on or prior to the
first anniversary of the Acquisition Event, the Participant terminates his or
her employment for Good Reason or is terminated without Cause by the surviving
or acquiring corporation. "Good Reason" shall mean any significant diminution in
the optionee's title, authority or responsibilities from and after such
Acquisition Event or any reduction in the annual cash compensation payable to
the Participant from and after such Acquisition Event. "Cause" shall mean any
willful misconduct by the Participant which affects the business reputation of
the Company or willful failure by the Participant to perform his or her material
responsibilities to the Company (including, without limitation, breach by the
Participant of any provision of any employment, consulting, advisory,
nondisclosure, non-competition or other similar agreement between the
Participant and the Company). The Participant shall be considered to have been
discharged for "Cause" if the Company determines, within 30 days after the
Participant's resignation, that discharge for Cause was warranted.
An "Acquisition Event" shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing immediately thereafter (either by remaining outstanding or
by being converted into voting securities of the surviving or acquiring entity)
less than 50% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (b) any sale of all or substantially all of the assets
of the Company; or (c) the complete liquidation of the Company.
ii. Assumption of Options Upon Certain Events. The Board 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 as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and
conditions as the Board considers appropriate in the circumstances.
f. Withholding. Each Participant shall pay to the Company, or make
-----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to a
Participant.
g. Amendment of Award. The Board may amend, modify or terminate any
------------------
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and
6
<PAGE>
converting an Incentive Stock Option to a Nonstatutory Stock Option, provided
that the Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
h. Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
i. Acceleration. The Board may at any time provide that any Options
------------
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of all restrictions or that any other stock-based
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
9. Miscellaneous
-------------
a. No Right To Employment or Other Status. No person shall have any
--------------------------------------
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
b. No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
c. Effective Date and Term of Plan. The Plan shall become effective on
-------------------------------
the date on which it is adopted by the Board, but no Award granted to a
Participant designated as subject to Section 162(m) by the Board shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders. No Awards shall be
granted under the Plan after the completion of ten years from the earlier of (i)
the date on which the Plan was adopted by the Board or (ii) the date the Plan
was approved by the Company's stockholders, but Awards previously granted may
extend beyond that date.
7
<PAGE>
d. Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time, provided that no Award granted to a
Participant designated as subject to Section 162(m) by the Board after the date
of such amendment shall become exercisable, realizable or vested, as applicable
to such Award (to the extent that such amendment to the Plan was required to
grant such Award to a particular Participant), unless and until such amendment
shall have been approved by the Company's stockholders.
e. Stockholder Approval. For purposes of this Plan, stockholder approval
--------------------
shall mean approval by a vote of the stockholders in accordance with the
requirements of Section 162(m) of the Code.
f. Governing Law. The provisions of the Plan and all Awards made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
8
<PAGE>
LINKAGE SOLUTIONS, INC.
Incentive Stock Option Agreement
Granted Under 1999 Stock Incentive Plan
---------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Linkage Solutions, Inc., a Delaware
corporation (the "Company"), on[________, ____] (the "Grant Date") to
[___________________], an employee of the Company (the "Participant"), of an
option to purchase, in whole or in part, on the terms provided herein and in the
Company's 1999 Stock Incentive Plan (the "Plan"), a total of
[__________________] shares of common stock, $.01 par value per share, of the
Company ("Common Stock") (the "Shares") at $[__________] per Share.
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant," as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms. Except where the context
otherwise requires, the term "Company" shall include any present or future
subsidiary corporations of Linkage Solutions, Inc. as defined in Section 424(f)
of the Code.
2. Vesting Schedule.
----------------
Except as otherwise provided in this agreement, this option shall vest and
become exercisable in installments (each, an "installment"). During each
exercise period indicated in the table below, this option shall be exercisable
as to not more than the percentage of the total number of shares subject to this
option indicated in the table below. No installment shall be exercisable after
the fifth anniversary of the vesting date of such installment (each, an
"Installment Expiration Date"), except as otherwise provided in Section 3(d)
below. If, after the respective Installment Expiration Date, an installment
shall for any reason not have been exercised in full (except as otherwise
provided in Section 3(d) below), the option shall be deemed to have expired with
respect to the unpurchased shares in such installment.
<TABLE>
<CAPTION>
Percentage of Shares as to
Installment Exercise Period Which Option is Exercisable
--------------------------- ----------------------------
<S> <C>
On or after ________, ____
but prior to ________, ____ ___%
On or after ________, ____
but prior to ________, ____ ___%
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
On or after ________, ____
but prior to ________, ____ ___%
On or after ________, ____
but prior to ________, ____ ___%
On or after ________, ____
but prior to ________, ____ ___%
</TABLE>
The right of exercise shall be cumulative so that if any installment is not
exercised to the maximum extent permissible during the respective installment
exercise period, it shall continue to be exercisable, in whole or in part, with
respect to all shares not so purchased at any time prior to the respective
Installment Expiration Date or the termination of this option under Section 3
hereof or the Plan.
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company or any parent or
subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an
"Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the final Installment
Expiration Date), provided that this option shall be exercisable only to the
extent that the Participant was entitled to exercise this option on the date of
such cessation. Notwithstanding the foregoing, if the Participant, prior to the
final Installment Expiration Date, violates the non-competition or
confidentiality provisions of any employment contract, confidentiality and
nondisclosure agreement or other agreement between the Participant and the
Company, the right to exercise this option shall terminate immediately upon such
violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Installment Expiration Date while he or she is an Eligible Participant and
the Company
2
<PAGE>
has not terminated such relationship for "cause" as specified in paragraph (e)
below, this option shall be exercisable, within the period of one year following
the date of death or disability of the Participant by the Participant, provided
that this option shall be exercisable only to the extent that this option was
exercisable by the Participant on the date of his or her death or disability,
and further provided that this option shall not be exercisable after the final
Installment Expiration Date.
(e) Discharge for Cause. If the Participant, prior to the final
-------------------
Installment Expiration Date, is discharged by the Company for "cause" (as
defined below), the right to exercise this option shall terminate immediately
upon the effective date of such discharge. "Cause" shall mean willful
misconduct by the Participant or willful failure by the Participant to perform
his or her responsibilities to the Company (including, without limitation,
breach by the Participant of any provision of any employment, consulting,
advisory, nondisclosure, noncompetition or other similar agreement between the
Participant and the Company), as determined by the Company, which determination
shall be conclusive. The Participant shall be considered to have been
discharged for "cause" if the Company determines, within 30 days after the
Participant's resignation, that discharge for cause was warranted.
4. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
5. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
6. Disqualifying Disposition.
-------------------------
If the Participant disposes of Shares acquired upon exercise of this option
within two years from the date of grant of the option or one year after such
Shares were acquired pursuant to exercise of this option, the Participant shall
notify the Company in writing of such disposition.
7. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
LINKAGE SOLUTIONS, INC.
Dated: ___________________ By: __________________________________
Name: ________________________________
Title: _______________________________
4
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
________________________________________
Name: _______________________________
Address: _______________________________
_______________________________
_______________________________
5
<PAGE>
LINKAGE SOLUTIONS, INC.
Nonstatutory Stock Option Agreement
Granted Under 1999 Stock Incentive Plan
---------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Linkage Solutions, Inc., a Delaware
corporation (the "Company"), on [___________, _____] (the "Grant Date") to
[__________________], an [employee], [consultant], [director] of the Company
(the "Participant"), of an option to purchase, in whole or in part, on the terms
provided herein and in the Company's 1999 Stock Incentive Plan (the "Plan"), a
total of [__________________] shares of common stock, $.01 par value per share,
of the Company ("Common Stock") (the "Shares") at $[__________] per Share.
It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant," as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms. Except where the context
otherwise requires, the term "Company" shall include any present or future
subsidiary corporations of Linkage Solutions, Inc. as defined in Section 424(f)
of the Code.
2. Vesting Schedule.
----------------
Except as otherwise provided in this agreement, this option shall vest and
become exercisable in installments (each, an "installment"). During each
exercise period indicated in the table below, this option shall be exercisable
as to not more than the percentage of the total number of shares subject to this
option indicated in the table below. No installment shall be exercisable after
the fifth anniversary of the vesting date of such installment (each, an
"Installment Expiration Date"), except as otherwise provided in Section 3(d)
below. If, after the respective Installment Expiration Date, an installment
shall for any reason not have been exercised in full (except as otherwise
provided in Section 3(d) below), the option shall be deemed to have expired with
respect to the unpurchased shares in such installment.
<TABLE>
<CAPTION>
Percentage of Shares as to
Installment Exercise Period Which Option is Exercisable
------------------------------- ----------------------------
<S> <C>
On or after ________, ____
but prior to ________, ____ ___%
On or after ________, ____
but prior to ________, ____ ___%
</TABLE>
<PAGE>
<TABLE>
<S> <C>
On or after ________, ____
but prior to ________, ____ ___%
On or after ________, ____
but prior to ________, ____ ___%
On or after ________, ____
but prior to ________, ____ ___%
</TABLE>
The right of exercise shall be cumulative so that if any installment is not
exercised to the maximum extent permissible during the respective installment
exercise period, it shall continue to be exercisable, in whole or in part, with
respect to all shares not so purchased at any time prior to the respective
Installment Expiration Date or the termination of this option under Section 3
hereof or the Plan.
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company or any parent or
subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an
"Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the final Installment
Expiration Date), provided that this option shall be exercisable only to the
extent that the Participant was entitled to exercise this option on the date of
such cessation. Notwithstanding the foregoing, if the Participant, prior to the
final Installment Expiration Date, violates the non-competition or
confidentiality provisions of any employment contract, confidentiality and
nondisclosure agreement or other agreement between the Participant and the
Company, the right to exercise this option shall terminate immediately upon such
violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the final Installment Expiration Date while he or she is an Eligible Participant
and the Company
2
<PAGE>
has not terminated such relationship for "cause" as specified in paragraph (e)
below, this option shall be exercisable, within the period of one year following
the date of death or disability of the Participant, by the Participant, provided
that this option shall be exercisable only to the extent that this option was
exercisable by the Participant on the date of his or her death or disability,
and further provided that this option shall not be exercisable after the final
Installment Expiration Date.
(e) Discharge for Cause. If the Participant, prior to the final
-------------------
Installment Expiration Date, is discharged by the Company for "cause" (as
defined below), the right to exercise this option shall terminate immediately
upon the effective date of such discharge. "Cause" shall mean willful
misconduct by the Participant or willful failure by the Participant to perform
his or her responsibilities to the Company (including, without limitation,
breach by the Participant of any provision of any employment, consulting,
advisory, nondisclosure, noncompetition or other similar agreement between the
Participant and the Company), as determined by the Company, which determination
shall be conclusive. The Participant shall be considered to have been
discharged for "cause" if the Company determines, within 30 days after the
Participant's resignation, that discharge for cause was warranted.
4. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
5. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
6. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
3
<PAGE>
LINKAGE SOLUTIONS, INC.
Dated: ___________________ By: ______________________________
Name: ____________________________
Title: ___________________________
4
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
________________________________________
Name: _______________________________
Address: _______________________________
_______________________________
_______________________________
5
<PAGE>
Exhibit 10.3
LINKAGE SOLUTIONS, INC.
1999 DIRECTOR STOCK OPTION PLAN
1. Purpose
-------
The purpose of this 1999 Director Stock Option Plan (the "Plan") of Linkage
Solutions, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate outside directors ("Directors") of the Company by
providing such Directors with equity ownership opportunities and performance-
based incentives and thereby better aligning the interests of such persons with
those of the Company's stockholders.
2. Eligibility
-----------
Each Director of the Company who is not an employee of the Company (an
"Eligible Director") is eligible to be granted options (an "Option") under the
Plan. Any person who has been granted an Option under the Plan shall be deemed
a "Participant."
3. Administration, Delegation
--------------------------
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have authority to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable. The Board may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. All decisions by the Board shall be
made in the Board's sole discretion and shall be final and binding on all
persons having or claiming any interest in the Plan or in any Option. No
Director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
4. Stock Available for Options
---------------------------
a. Number of Shares. Subject to adjustment under Section 4(b), Options
----------------
may be made under the Plan for up to 150,000 shares of common stock, $.01 par
value per share, of the Company (the "Common Stock"). If any Option expires or
is terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Option shall again be available for the
grant of Options under the Plan. Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
<PAGE>
b. Adjustment to Common Stock. In the event of any stock split, stock
--------------------------
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of securities and exercise price per
share subject to each outstanding Option, and (iii) the number and class of
securities available for automatic grants shall be appropriately adjusted by the
Company (or substituted Options may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate. If this Section 4(b) applies and Section 6(c)
also applies to any event, Section 6(c) shall be applicable to such event, and
this Section 4(b) shall not be applicable.
5. Stock Options
-------------
a. Automatic Grants.
----------------
(i) Each Eligible Director who is serving on the Board on the
effective date (the "Effective Date") of the initial public
offering (the "IPO") of the Common Stock and who continues to
serve after the closing of the IPO (each, an "IPO Director")
shall be granted an Option to purchase 8,000 shares of Common
Stock as of the Effective Date.
(ii) Each IPO Director who is serving on the Board at the adjournment
of the annual meeting of the Company held in the year 2000 or at
the adjournment of any subsequent annual meeting shall be
granted an option to purchase 4,000 shares of Common Stock at
the close of business on the date of each such adjournment.
(iii) Each Eligible Director who is not an IPO Director shall be
granted an Option to purchase 8,000 shares of Common Stock at
the close of business on the date such Eligible Director is
first elected to serve on the Board.
(iv) Each Eligible Director who is not an IPO Director and who is
serving on the Board at the adjournment of any annual meeting
which begins after the date of his or her election shall be
granted an Option to purchase 4,000 shares of Common Stock at
the close of business on the date of each such adjournment.
b. Option Exercise Price. The option exercise price per share for each
---------------------
Option granted under the Plan shall equal (i) the last reported sales price per
share of the Company's Common Stock as listed on a nationally recognized
securities exchange or the Nasdaq National Market, as the case may be, on the
date of grant (or, if no such
<PAGE>
price is reported on such date, such price as reported on the nearest preceding
day); or (ii) the fair market value of the stock on the date of grant, as
determined by the Board of Directors, if the Common Stock is not publicly
traded. Notwithstanding the preceding sentence, the option exercise price per
share for each Option granted on the Effective Date shall be the price per share
for which the Common Stock was offered to the public.
c. Exercise Period. Each Option granted pursuant to clauses (i) and
---------------
(iii) of Section 5(a) shall vest and be exercisable on the first anniversary of
the date of the grant of such Option, and each Option granted pursuant to
clauses (ii) and (iv) of Section 5(a) shall vest and be exercisable on the
earlier of (x) the first anniversary of the date of the grant of such option or
(y) the day prior to the first annual meeting of stockholders following the date
of grant of such option, provided that, in each instance described herein the
Participant continue to serve as a director on such dates. In addition, subject
to the provisions of Section 5(d), no Option may be exercised more than 90 days
after the Participant ceases to serve as a director of the Company and such
Option may only be exercised for the purchase of such number of shares as were
vested and exercisable at the time of such termination. No Option shall be
exercisable after the expiration of ten (10) years from the date of grant or
prior to approval of the Plan by the stockholders of the Company.
d. Exercise Period Upon Death or Disability. Notwithstanding the
----------------------------------------
provisions of Section 5(c), any Option granted under the Plan:
(i) may be exercised in full by a Participant who becomes disabled
(within the meaning of Section 22(e)(3) of the Code or any
successor provision thereto) while serving as a Director of the
Company; or
(ii) may be exercised
(x) in full upon the death of the Participant while serving as a
Director of the Company, or
(y) to the extent then exercisable upon the death of the
Participant within 90 days of ceasing to serve as a Director
of the Company,
by the person to whom it is transferred by will, by the laws of
descent and distribution, or by written designation of
beneficiary filed with the Company;
in each such case within the period of one year after the date the Participant
ceases to be such a director by reason of such death or disability; provided,
that no Option shall be exercisable after the expiration of ten (10) years from
the date of grant.
<PAGE>
e. Payment Upon Exercise. Common Stock purchased upon the exercise of an
----------------------
Option granted under the Plan shall be paid for as follows:
i. in cash or by check, payable to the order of the Company;
ii. except as the Board may otherwise provide in an Option Agreement,
by delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or by delivery by the Participant to the Company of a copy of irrevocable
and unconditional instructions to a creditworthy broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise price;
iii. to the extent permitted by the Board and explicitly provided in
an Option Agreement (i) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant at
least six months prior to such delivery, (ii) by delivery of a promissory note
of the Participant to the Company on terms determined by the Board, or (iii) by
payment of such other lawful consideration as the Board may determine; or
iv. by any combination of the above permitted forms of payment.
6. General Provisions Applicable to Options
----------------------------------------
a. Transferability of Options. Except as the Board may otherwise
--------------------------
determine or provide in an Option, Options shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
b. Documentation. Each Option under the Plan shall be evidenced by a
-------------
written instrument in such form as the Board shall determine. Each Option may
contain terms and conditions in addition to those set forth in the Plan.
c. Acquisition Events. Upon the occurrence of an Acquisition Event (as
------------------
defined below), the Participant shall have the right to exercise the Option in
full, including with respect to shares of Common Stock as to which it would not
otherwise be exercisable. In the event of an Acquisition Event, the Board shall
notify the Participant in writing or electronically that the Option shall be
fully exercisable for a period of not less than forty-five (45) days from the
date of such notice, and the Option shall terminate upon the expiration of such
period. An "Acquisition Event" shall mean: (a) any merger or consolidation
which results in the voting securities of the Company outstanding immediately
prior thereto representing immediately thereafter (either by remaining
<PAGE>
outstanding or by being converted into voting securities of the surviving or
acquiring entity) less than 50% of the combined voting power of the voting
securities of the Company or such surviving or acquiring entity outstanding
immediately after such merger or consolidation; (b) any sale of all or
substantially all of the assets of the Company; or (c) the complete liquidation
of the Company.
d. Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Option have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
e. Acceleration. The Board may at any time provide that any Options
------------
shall become immediately exercisable in full or in part.
7. Miscellaneous
-------------
a. No Right To Board Membership or Other Status. Neither the Plan nor
--------------------------------------------
the granting of an Option shall be construed as giving a Participant the right
to continue as a Director of the Company.
b. No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Options, no Participant or beneficiary designated by the Participant shall have
any rights as a stockholder with respect to any shares of Common Stock to be
distributed with respect to an Option until becoming the record holder of such
shares.
c. Effective Date and Term of Plan. The Plan shall become effective on
-------------------------------
the date on which it is adopted by the Board. No Options shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but Options previously granted may extend beyond that
date.
d. Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time.
e. Governing Law. The provisions of the Plan and all Options made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
<PAGE>
LINKAGE SOLUTIONS, INC.
Nonstatutory Stock Option Agreement
Granted Under 1999 Director Stock Option Plan
---------------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Linkage Solutions, Inc., a Delaware
corporation (the "Company"), on [___________, ____] (the "Grant Date") to
[__________________], a director of the Company (the "Participant"), of an
option to purchase, in whole or in part, on the terms provided herein and in the
Company's 1999 Director Stock Option Plan (the "Plan"), a total of
[___________] shares of common stock, $.01 par value per share, of the Company
("Common Stock") (the "Shares") at $[__________] per Share. Unless earlier
terminated, this option shall expire on the tenth anniversary of the Grant Date
(the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant," as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
----------------
This option will become exercisable ("vest") as to 100% of the original
number of Shares on the first anniversary of the Grant Date. This option shall
expire upon, and will not be exercisable after, the Final Exercise Date.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
3. Exercise of Option.
------------------
a. Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
b. Continuous Relationship with the Company Required. Except as
-------------------------------------------------
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the
<PAGE>
time he or she exercises this option, is, and has been at all times since the
date of grant of this option, a director of the Company or any parent or
subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an
"Eligible Participant").
c. Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraph (d) below, the right to exercise this option shall terminate ninety
(90) days after such cessation (but in no event after the Final Exercise Date),
provided that this option shall be exercisable only to the extent that the
Participant was entitled to exercise this option on the date of such cessation.
d. Exercise Period Upon Death or Disability. Notwithstanding the
----------------------------------------
provisions of Section 5(c) of the Plan, any Option granted under the Plan:
(i) may be exercised in full by the Participant who becomes disabled
(within the meaning of Section 22(e)(3) of the Code or any
successor provision thereto) while serving as a director of the
Company; or
(ii) may be exercised
(x) in full upon the death of the Participant while serving as a
director of the Company, or
(y) to the extent then exercisable upon the death of the
Participant within 90 days of ceasing to serve as a director
of the Company,
by the person to whom it is transferred by will, by the laws of
descent and distribution, or by written designation of
beneficiary filed with the Company;
in each such case within the period of one year after the date the Participant
ceases to be such a director by reason of such death or disability; provided,
that no Option shall be exercisable after the expiration of ten (10) years from
the date of grant.
4. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
-2-
<PAGE>
5. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
LINKAGE SOLUTIONS, INC.
Dated: ______________________ By: ________________________________
Name: ______________________________
Title: _____________________________
-3-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1999 Director Stock Option Plan.
PARTICIPANT:
______________________________________
Name: _____________________________
Address: _____________________________
_____________________________
_____________________________
-4-
<PAGE>
Exhibit 10.4
LINKAGE SOLUTIONS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this 1999 Employee Stock Purchase Plan (the "Plan") is to
provide eligible employees of Linkage Solutions, Inc., a Delaware corporation
(the "Company"), and certain of its subsidiaries with opportunities to purchase
shares of the Company's common stock, $.01 par value (the "Common Stock"). Two
hundred fifty thousand (250,000) shares of Common Stock in the aggregate have
been approved for this purpose.
1. Administration. The Plan will be administered by the Company's Board
--------------
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted nor
-----------
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended, and regulations promulgated thereunder (the "Code"). All
employees of the Company, including Board members who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least three months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
<PAGE>
3. Offerings. The Company will make one or more offerings ("Offerings")
---------
to employees to purchase stock under this Plan. Offerings will begin on such
date or dates as may be established by the Board from time to time (the
"Offering Commencement Dates"), provided that the first Offering Commencement
Date shall be the date on which trading of the Common Stock commences on the
Nasdaq National Market in connection with an initial public offering of Common
Stock pursuant to an effective registration statement under the Securities Act
of 1933, as amended (the "Securities Act"). Each Offering Commencement Date
will begin a [__]-month period (a "Plan Period") during which payroll deductions
will be made and held for the purchase of Common Stock at the end of the Plan
Period. The Board or the Committee may, at its discretion, choose a different
Plan Period of twelve (12) months or less for subsequent Offerings.
4. Participation. An employee eligible on the Offering Commencement Date
-------------
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 14 days prior to the applicable Offering Commencement Date. The
form will authorize a regular payroll deduction from the Compensation (as
defined below) received by the employee during the Plan Period. Unless an
employee files a new form or withdraws from the Plan, his or her deductions and
purchases will continue at the same rate for future Offerings under the Plan as
long as the Plan remains in effect. The term "Compensation" means the amount of
money reportable on the employee's Federal Income Tax Withholding Statement,
excluding overtime, shift premium, incentive or bonus awards, allowances and
reimbursements for expenses such as relocation allowances for travel expenses,
income or gains on the exercise of Company stock options or stock appreciation
rights, and similar items, whether or not shown on the employee's Federal Income
Tax Withholding Statement, but including, in the case of salespersons, sales
commissions to the extent determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for
----------
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction, as set forth below, from the
Compensation he or she receives during the Plan Period or such shorter period
during which deductions from payroll are made. Payroll deductions may be at the
rate of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% of Compensation.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other
employee stock purchase plan (as defined in Section 423(b) of the Code) of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the Offering Commencement
Date of the Plan Period) for each calendar year in which the Option is
outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue his or her
-----------------
payroll deduction once during any Plan Period, by filing a new payroll deduction
2
<PAGE>
authorization form. However, an employee may not increase his or her payroll
deduction during a Plan Period. If an employee elects to discontinue his or her
payroll deductions during a Plan Period, but does not elect to withdraw his
funds pursuant to Section 8 hereof, funds deducted prior to his or her election
to discontinue will be applied to the purchase of Common Stock on the Exercise
Date (as defined below).
7. Interest. Interest will not be paid on any employee accounts, except
--------
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close
-------------------
of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
------------------
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by dividing $12,500 by the
closing price (as defined below) on the first business day of such Plan Period
or such other number as may be determined by the Board prior to the Offering
Commencement Date.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
- -----------------------
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
Notwithstanding the foregoing, for purposes of this Section 9, the closing price
of the Common Stock on the first business day of the first Plan Period shall be
deemed to be the price per share for which the Common Stock was offered to the
public in the Company's initial public offering.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common
3
<PAGE>
Stock reserved for the purpose of the Plan that his accumulated payroll
deductions on such date will pay for, but not in excess of the maximum number
determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.
11. Rights on Retirement, Death or Termination of Employment. In the
--------------------------------------------------------
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law), (b) in the absence of such
a designated beneficiary, to the executor or administrator of the employee's
estate, or (c) if no such executor or administrator has been appointed to the
knowledge of the Company, to such other person(s) as the Company may, in its
discretion, designate. If, prior to the last business day of the Plan Period,
the Designated Subsidiary by which an employee is employed shall cease to be a
subsidiary of the Company, or if the employee is transferred to a subsidiary of
the Company that is not a Designated Subsidiary, the employee shall be deemed to
have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him or her.
13. Rights Not Transferable. Rights under this Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
4
<PAGE>
14. Application of Funds. All funds received or held by the Company under
--------------------
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
any stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to holders of
Common Stock other than a normal cash dividend, the number of shares approved
for this Plan, the number of shares subject to any outstanding Option and the
purchase price thereof shall be adjusted proportionately, and such other
adjustment shall be made as may be deemed equitable by the Board or the
Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
------
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 15 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, all outstanding Options shall be
cancelled by the Board or the Committee as of the effective date of any such
transaction, provided that notice of such cancellation shall be given to each
holder of an Option, and each holder of an Option shall have the right to
exercise such Option in full based on payroll deductions then credited to his
account as of a date determined by the Board or the Committee, which date shall
not be less than ten (10) days preceding the effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may
5
<PAGE>
any amendment be made which would cause the Plan to fail to comply with Section
423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
-------------------
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
-----------------------
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
------------------------
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market and the approval of all
governmental authorities required in connection with the authorization, issuance
or sale of such stock.
21. Governing Law. The Plan shall be governed by Delaware law except to
-------------
the extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased or
one year after the date of exercise of the Option.
24. Effective Date and Approval of Stockholders. The Plan shall take
-------------------------------------------
effect upon the effectiveness of the Company's registration statement under the
Securities Act relating to the Company's initial public offering of Common
Stock, subject to approval by the stockholders of the Company as required by
Section 423 of the Code, which approval must occur within twelve months of the
adoption of the Plan by the Board.
6
<PAGE>
Exhibit 10.5
DATE OF LEASE EXECUTION: May 21, 1996
ARTICLE 1
REFERENCE DATA
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1:
LANDLORD: The Trustees of Lexington Development Company Trust
MANAGING AGENT: Spaulding and Slye Services Limited Partnership
LANDLORD'S & MANAGING AGENT'S ADDRESS:
c/o Spaulding and Slye Company
25 Mall Road
Burlington, MA 01803
Attn: Treasurer
LANDLORD'S REPRESENTATIVE: Mr. Bruce Nolen
TENANT: Linkage, Inc., a Massachusetts corporation
TENANT'S ADDRESS (FOR NOTICE AND BILLING): One Forbes Road,
Lexington, MA 02173
TENANT'S REPRESENTATIVE: Mr. Larry Carr, Senior Vice President
BUILDING ADDRESS: One Forbes Road, Lexington, MA
RENTABLE FLOOR AREA
OF TENANT'S SPACE: 14,404 square feet as of the Commencement Date; 21,279
as of the First Expansion Commencement Date; and 24,530
as of the Second Expansion Commencement Date
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 24,530 square feet
SCHEDULED TERM COMMENCEMENT DATE: September 1, 1996
-1-
<PAGE>
SCHEDULED FIRST EXPANSION COMMENCEMENT DATE: March 1, 1997
SCHEDULED SECOND EXPANSION COMMENCEMENT DATE: August 1, 1997
TERM EXPIRATION DATE: December 31, 2002
APPROXIMATE TERM: 76 months subject to earlier termination in accordance with
the provisions hereof
ANNUAL BASE RENT COMMENCEMENT DATE: Three (3) months after the
Commencement Date
ANNUAL BASE RENT RATE: $16.00 (p.r.s.f.) in 1996 and 1997;
$17.00 (p.r.s.f.) in 1998 through 2001; and
$18.00 (p.r.s.f.) in 2002
ANNUAL BASE RENT: (a) $230,464 for the period from the Annual Base Rent
Commencement Date through the First Expansion Commencement
Date (based on 14,404 r.s.f. x $16.00);
(b) $340,464 for the period from the First Expansion
Commencement Date through the Second Expansion Commencement
Date (based on 21,279 r.s.f. x $16.00);
(c) $392,480 for the period from the Second Expansion
Commencement Date through December 31, 1997 (based on 24,530
r.s.f. x $16.00)
(d) $417,010 for the period from January 1, 1998 through
December 31, 2001 (based on 24,530 r.s.f. x $17.00); and
(e) $441,540 for the period from January 1, 2002 through
December 31, 2002 (based on 24,530 r.s.f. x $18.00)
ANNUAL ESTIMATED ELECTRICAL COST: $0.85 (p.r.s.f.)
ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE
(Incl. in Annual Rent):
(a) $12,243.40 as of the Commencement Date
(b) $18,087.50 as of the First Expansion Commencement Date
(c) $20,850.50 as of the Second Expansion Commencement Date
-2-
<PAGE>
ANNUAL RENT (equal to the sum of Annual Base Rent and Annual Estimated
Electrical Cost to Tenant's Space):
(a) $12,243.40 for the period from the Commencement Date through the
Annual Base Rent Commencement Date;
(b) $242,707.40 for the period from the Annual Base Rent Commencement Date
through the First Expansion Commencement Date;
(c) $358,551.50 for the period from the First Expansion Commencement Date
through the Second Expansion Commencement Date;
(d) $413,330.50 for the period from the Second Expansion Commencement Date
through December 31, 1997;
(e) $437,850.50 for the period from January 1, 1998 through December 31,
2001; and
(f) $462,390.50 for the period from January 1, 2002, through December 31,
2002.
ANNUAL ESTIMATED OPERATING COSTS: $165,577.50; $6.75 (p.r.s.f.)
SECURITY DEPOSIT: $50,000, subject to the provisions of Article XI hereof
TENANT ALLOWANCE: $13.50 (p.r.s.f.), as allocated pursuant to Article III
hereof
PERMITTED USES: Office uses and uses accessory thereto permitted under
applicable zoning and other legal requirements
PUBLIC LIABILITY INSURANCE: BODILY INJURY: $2,000,000
PROPERTY DAMAGE: $1,000,000
OPTION TO EXTEND: One option to extend for a period of three years for the
period from January 1, 2003 to December 31, 2005.
1.2 EXHIBITS.
The exhibits listed below in this section are incorporated in this Lease by
reference and are to be construed as part of this Lease:
EXHIBIT A-1 Plan showing Tenant's Space as of the Commencement Date.
-3-
<PAGE>
EXHIBIT A-2 Plan showing Tenant's Space as of the First Expansion
Commencement Date.
EXHIBIT A-3 Plan showing Tenant's Space as of the Second Expansion
Commencement Date.
EXHIBIT B Landlord's Services.
EXHIBIT C Rules and Regulations.
1.3 TABLE OF CONTENTS PAGE
<TABLE>
<S> <C>
ARTICLE I - REFERENCE DATA......................................... 1
1.1 SUBJECTS REFERRED TO................................... 1
1.2 EXHIBITS............................................... 3
ARTICLE II - PREMISES AND TERM..................................... 7
2.1 PREMISES............................................... 7
2.2 TERM................................................... 7
2.3 OPTION TO EXTEND....................................... 8
ARTICLE III - CONSTRUCTION......................................... 9
3.1 INITIAL CONSTRUCTION................................... 9
3.2 PREPARATION OF PREMISES FOR OCCUPANCY.................. 11
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.......... 13
3.4 REPRESENTATIVES........................................ 13
3.5 SIGNAGE................................................ 13
3.6 IMPROVEMENTS TO BUILDING LOBBY......................... 14
ARTICLE IV - RENT.................................................. 14
4.1 RENT................................................... 14
4.2 OPERATING COSTS; ESCALATION............................ 14
4.3 ESTIMATED ESCALATION PAYMENTS.......................... 16
4.4 ELECTRICITY............................................ 17
4.5 CHANGE OF FISCAL YEAR.................................. 17
4.6 PAYMENTS............................................... 17
ARTICLE V - LANDLORD' S COVENANTS.................................. 18
5.1 LANDLORD' S COVENANTS DURING THE TERM.................. 18
5.2 INTERRUPTIONS.......................................... 18
ARTICLE VI - TENANT' S COVENANTS................................... 19
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
6.1 TENANT' S COVENANTS DURING THE TERM......................... 19
ARTICLE VII - CASUALTY AND TAKING....................................... 24
7.1 CASUALTY AND TAKING......................................... 24
7.2 RESERVATION OF AWARD........................................ 25
ARTICLE VIII - RIGHTS OF MORTGAGEE...................................... 25
8.1 PRIORITY OF LEASE........................................... 25
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S
LIABILITY................................................... 26
8.3 MORTGAGEE'S ELECTION........................................ 26
8.4 NO PREPAYMENT OR MODIFICATION, ETC.......................... 27
8.5 NO RELEASE OR TERMINATION................................... 27
8.6 CONTINUING OFFER............................................ 27
8.7 MORTGAGEE'S APPROVAL........................................ 28
ARTICLE IX - DEFAULT.................................................... 28
9.1 EVENTS OF DEFAULT........................................... 28
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION...................... 29
ARTICLE X - MISCELLANEOUS............................................... 30
10.1 NOTICE OF LEASE............................................. 30
10.2 INTENTIONALLY DELETED....................................... 30
10.3 NOTICES FROM ONE PARTY TO THE OTHER......................... 30
10.4 BIND AND INURE.............................................. 31
10.5 NO SURRENDER................................................ 31
10.6 NO WAIVER, ETC.............................................. 31
10.7 NO ACCORD AND SATISFACTION.................................. 32
10.8 CUMULATIVE REMEDIES......................................... 32
10.9 LANDLORD'S RIGHT TO CURE.................................... 32
10.10 ESTOPPEL CERTIFICATE........................................ 32
10.11 WAIVER OF SUBROGATION....................................... 33
10.12 ACTS OF GOD................................................. 33
10.13 BROKERAGE................................................... 33
10.14 SUBMISSION NOT AN OFFER..................................... 33
10.15 APPLICABLE LAW AND CONSTRUCTION............................. 34
ARTICLE XI - SECURITY DEPOSIT........................................... 34
</TABLE>
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<PAGE>
ARTICLE II
PREMISES AND TERM
2.1 PREMISES.
Subject to and with the benefit of the provisions of this Lease relating to
the parcel on which the Building is located (the "Lot"), Landlord hereby leases
to Tenant, and Tenant leases from Landlord, effective on the Commencement Date
(as defined in Section 2.2 hereof), Tenant's Space in the Building as shown on
Exhibit A-1 (the "Initial Premises"); effective on the First Expansion
Commencement Date (as defined in Section 3.2 hereof), Tenant's Space in the
Building as shown on Exhibit A-2 (the "Interim Premises"); and effective on the
Second Expansion Commencement Date (as defined in Section 3.2 hereof), Tenant's
Space in the Building as shown on Exhibit A-3 (the "Final Premises"), in each
case excluding exterior faces of exterior walls, the common facilities area and
building service fixtures and equipment serving exclusively or in common other
parts of the Building. Tenant's Space, with such exclusions, is hereinafter
referred to as the "Premises," consisting of the Initial Premises as of the
Commencement Date; the Interim Premises as of the First Expansion Commencement
Date; and the Final Premises as of the Second Expansion Commencement Date. (The
portion of the Interim Premises not included in the Initial Premises is
hereinafter referred to as the "First Expansion Premises," and the portion of
the Final Premises not included in the Interim Premises is hereinafter referred
to as the "Second Expansion Premises".)
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto: (a) the common facilities included in the
Building or on the Lot, including the parking facility, if any, on a first-come,
first-served basis, to the extent and in the location from time to time
designated by Landlord, and (b) the building service fixtures and equipment
serving the Premises.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use, (a) to install, repair, replace, use, maintain
and relocate for service to the Premises and to other parts of the Building or
either, building service fixtures and equipment wherever located in the Building
and (b) to alter or relocate any common facilities, it being understood that
parking spaces may be relocated on or off the Lot from time to time by Landlord,
provided that in all events substitutions are substantially equivalent.
2.2 TERM.
To have and to hold for a period (the "Term") commencing on the earliest of
(a) the date on which the Premises are deemed ready for occupancy as provided in
Section 3.2, and (b) the date on which Tenant occupies all or any part of the
Premises
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(whichever of said dates is appropriate being hereafter referred to as the
"Commencement Date"), and continuing until the Term Expiration Date, unless
sooner terminated as provided in Section 3.2 or 7.1 or in Article IX. Landlord
and Tenant will execute, upon request of either, a certificate acknowledging the
Commencement Date of this Lease once such commencement date has occurred.
2.3 OPTION TO EXTEND.
Tenant shall have the right and option to extend the Term for one
additional period of three (3) years (the "Extension Term") commencing upon the
expiration of the original Term referred to in Section 1.1 of the Lease (the
"Original Term"), provided that (i) Tenant shall give Landlord notice of
Tenant's exercise of such option at least seven (7) months prior to the
expiration of the Original Term; (ii) Tenant shall not be in default at either
the time of giving such notice or at the time of the commencement of the
Extension Term in the performance or observance of any of the terms and
provisions of this Lease on the part of the Tenant to be performed or observed;
(iii) the Lease remains in full force and effect; and (iv) Tenant has neither
assigned the Lease nor sublet the Premises or any portion thereof. Prior to the
exercise by Tenant of such option, the expression "Term" shall mean the Original
Term, and after the exercise by Tenant of such option, the expression "Term"
shall mean the Original Term as it has been extended by the Extension Term.
Except as expressly otherwise provided in the following paragraph, all the
terms, covenants, conditions, provisions and agreements in the Lease contained
shall be applicable to the Extension Term, except Tenant's Extension Option set
forth in this Section 2.3 which shall not be applicable to the Extension Term.
If Tenant shall give notice of its exercise of said option to extend in the
manner and within the time period provided aforesaid, the Term shall be extended
upon the giving of such notice without the requirement of any further action on
the part of either Landlord or Tenant; provided, however, that upon the written
request of either party, the parties shall execute an amendment to the Lease
confirming the extension of the Lease effected hereby. If Tenant shall fail to
give timely notice of the exercise of any such option as aforesaid, Tenant shall
have no right to extend the Term of this Lease, time being of the essence of the
foregoing provisions.
The Annual Base Rent payable during the Extension Term shall be the amount
being the Fair Market Rent for the Premises, as determined below, as of the
commencement of the Extension Term. If for any reason the Annual Base Rent
payable during the Extension Term has not been determined as of the commencement
of the Extension Term, Tenant shall pay Annual Base Rent payable during the last
year of the Original Term until the Annual Base Rent for the Extension Term is
determined, at which time an appropriate adjustment, if any, shall be made. For
purposes hereof, the Fair Market Rent shall mean the fair rent for the Premises
as of the commencement of the Extension Term under market conditions
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then existing without allowance for tenant improvements as reasonably determined
by Landlord.
ARTICLE III
CONSTRUCTION
3.1 INITIAL CONSTRUCTION.
Landlord shall improve the Initial Premises in accordance with plans and
specifications there for to be mutually agreed upon by Landlord and Tenant (the
"Initial Leasehold Improvements") no later than June 1, 1996, Landlord and
Tenant agreeing to act diligently and in good faith to agree upon such plans and
specifications. The First Expansion Premises and the Second Expansion Premises
shall be improved by Landlord in accordance with construction drawings and
specifications approved by Landlord and Tenant in accordance with the following
provisions.
On or before December 1, 1996 with respect to the First Expansion Premises
and on or before May 1, 1997 with respect to the Second Expansion Premises,
Tenant shall provide to Landlord for approval complete sets of construction
drawings and specifications (the "Complete Plans") by Landlord's architect or an
architect approved by Landlord and Landlord's engineer, including but not
limited to:
a. Furniture and Equipment Layout Plans
b. Dimensioned Partition Plans
c. Dimensioned Electrical and Telephone Outlet Plans
d. Reflected Ceiling Plans
e. Door and Hardware Schedules
f. Room Finish Schedules including wall, carpet and floor tile colors
g. Electrical, mechanical and structural engineering plans
h. All necessary construction details and specifications.
Landlord and Tenant shall initial the Complete Plans after the same have been
submitted by Tenant and approved by Landlord.
All of Tenant's construction, installation of furnishings, and later
changes or additions shall be coordinated with any work being performed by
Landlord in such manner as to maintain harmonious labor relations and not to
damage the Building or Lot or interfere with Building operations. Except for
installation of furnishings and the installation of telephone outlets which must
be performed by the local telephone company at Tenant's direction and expense,
all work described in the Initial Leasehold Improvements, all work described in
the Complete Plans for the First
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Expansion Premises (the First Expansion Leasehold Improvements"), and all work
described in the Complete Plans for the Second Expansion Premises (the "Second
Expansion Leasehold Improvements") (collectively with the Initial Leasehold -
Improvements and the First Expansion Leasehold Improvements, the "Leasehold
Improvements") shall be performed by Landlord's general contractor, Spaulding
and Slye Construction Company.
Tenant shall pay to Landlord as additional rent a sum equal to all costs
incurred by Landlord on account of the Leasehold Improvements (excluding,
however, the Tenant Allowance which shall apply separately to the Initial
Leasehold Improvements, the First Expansion Leasehold Improvements and the
Second Expansion Leasehold Improvements, and with respect to the Initial
Leasehold Improvements only, an additional $2,000 allowance for further
improvements to the conference room and training area, but including in the
costs so incurred the cost to Landlord of Landlord's Contractor's overhead and
profit equal to 15% of costs of work and all architectural and engineering costs
incurred by Landlord), hereinafter called "Tenant Improvement Reimbursement to
Landlord" or "TIR." Any portion of the Tenant Allowance unused in connection
with the Initial Leasehold Improvements may be used in connection with the First
Expansion Leasehold Improvements and the Second Expansion Leasehold
Improvements; and any portion of the remaining Tenant Allowance unused in
connection with the Initial Leasehold Improvements and the First Expansion
Leasehold Improvements may be used in connection with the Second Expansion
Leasehold Improvements; provided, however, that Tenant must use a portion of the
Tenant Allowance with respect to each of the Initial Leasehold Improvements and
the First Leasehold Improvements to construct, at a minimum, building standard
carpet, building standard paint, and building standard ceiling. No portion of
the Tenant Allowance unused in connection with the Initial Leasehold
Improvements, the First Expansion Leasehold Improvements and the Second
Expansion Leasehold Improvements may be used in connection with any other
improvements for any other space in the Building and shall be forfeited.
Tenant shall pay to Landlord fifty percent (50%) of the TIR, if any,
applicable to each of the Initial Leasehold Improvements, the First Expansion
Leasehold Improvements and the Second Expansion Leasehold Improvements prior to
Landlord's commencement of construction of each of the Initial Leasehold
Improvements, the First Expansion Leasehold Improvements, and the Second
Expansion Leasehold Improvements, respectively. Thereafter, in the case of each
of the Initial Leasehold Improvements, the First Expansion Leasehold
Improvements and the Second Expansion Leasehold Improvements, Tenant shall pay
TIR to Landlord as construction of the applicable Leasehold Improvements
progresses, on submission by Landlord to Tenant of a statement on or about the
first day of each month showing construction and design costs incurred. Such
statement shall be accompanied by a certificate of Landlord's Contractor that
all payments then due to laborers, materialmen and subcontractors have been
made, less the aggregate amount
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of prior monthly progress payments made by Tenant. On the earlier of occupancy
or the applicable Commencement Date, Tenant shall pay to Landlord a sum equal to
the unpaid balance of TIR, if any, applicable to the then Leasehold
Improvements. In addition to paying TIR as above provided, Tenant shall pay an
amount equal to all costs incurred by Landlord as a result of any change orders
signed by Tenant and Landlord affecting the plans and specifications set forth
in Exhibit B or the Complete Plans for either the First Expansion Premises or
the Second Expansion Premises, including the cost to Landlord of Landlord's
Contractor's overhead and profit equal to 15% of those costs exclusive of
overhead and profit. Amounts due and payable on account of such change orders
shall be included in the monthly statements relating to TIR provided for above,
and Tenant shall pay therefor in accordance with each such statement within
thirty (30) days, and in all events by the applicable Commencement Date.
Subject to Section 6.1.15, Landlord will not approve any construction,
alterations, or additions requiring unusual expense to readapt the Premises to
normal office use on lease termination or increasing the cost of construction,
insurance or taxes on the Building or of Landlord's services called for by
Section 5.1 unless Tenant first gives assurances acceptable to Landlord that
such readaptation will be made prior to such termination without expense to
Landlord and makes provisions acceptable to Landlord for payment of such
increased cost. Landlord will also disapprove any alterations or additions
requested by Tenant which will delay completion of the Premises or the Building.
All changes and additions shall be part of the Building except such items as by
writing at the time of approval the parties agree either shall be removed by
Tenant on termination of this Lease, or shall be removed or left at Tenant's
election.
3.2 PREPARATION OF PREMISES FOR OCCUPANCY.
Landlord agrees to use reasonable efforts to have ready for occupancy (a)
the Initial Premises on or before the Scheduled Term Commencement Date, (b) the
First Expansion Premises on or before the First Expansion Commencement Date and
(c) the Second Expansion Premises on or before the Second Expansion Commencement
Date, each of which shall, however, be extended for a period equal to that of
any delays due to governmental regulations, unusual scarcity of or inability to
obtain labor or materials, labor difficulties, casualty or other causes beyond
Landlord's reasonable control. Each of the Initial Premises, the First Expansion
Premises and the Second Expansion Premises shall be deemed ready for occupancy
on the date on which the applicable Leasehold Improvements, as mutually agreed
upon by Landlord and Tenant pursuant to Section 3.1 hereof with respect to the
Initial Leasehold Improvements and as specified in the Complete Plans with
respect to the First Expansion Premises or the Second Expansion Premises, as
applicable, are ready for occupancy as evidenced by a certificate of occupancy
therefor, it being understood that so-called punchlist items which can be fully
completed without material
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interference with Tenant and other items which because of the season or weather
or the nature of the item are not practicable to do at the time may not have
been completed, provided that none of said items is necessary to make such
portion of the Premises tenantable for the Permitted Uses and provided further
that all said items shall be completed within thirty (30) days after occupancy,
subject to delay for causes beyond Landlord's reasonable control; provided,
however, that if Landlord is unable to complete construction due to delay in
Tenant's compliance with the provisions of Section 3.1 of this Lease, then such
portion of Premises shall be deemed ready for occupancy no later than the
Scheduled Term Commencement Date in the case of the Initial Premises, the First
Expansion Commencement Date in the case of the First Expansion Premises, and the
Second Expansion Commencement Date in the case of the Second Expansion Premises.
Tenant and Landlord or Landlord's architect shall inspect the Initial Premises,
the First Expansion Premises or the Second Expansion Premises, as the case may
be, to determine the punchlist items, if any, which must be completed by
Landlord after the applicable Commencement Date. Window blinds in the Premises
will be delivered in a clean and operable condition.
Subject to applicable legal requirements, Landlord shall permit Tenant
access for installing equipment and furnishings in the Initial Premises prior to
the Term if it can be done without material interference with completion of the
Building or remaining portions of the Initial Leasehold Improvements, and shall
also permit Tenant such access in the First Expansion Premises and the Second
Expansion Premises prior to the applicable Expansion Commencement Date if it can
be done without material interference with completion of the Building or
remaining portions of the applicable Expansion Leasehold Improvements.
In the event of Tenant's failure to comply with the provisions of Section
3.1 to submit information or to deliver construction drawings and specifications
which meet Landlord's approval, Landlord may, at Landlord's option, exercisable
by notice to Tenant, either (a) terminate this Lease on the date specified in
said notice to Tenant (i) with respect to the entire Premises in the case of
such failure at any time, (ii) with respect to the First and Second Expansion
Premises, but not the Initial Premises, in the case of such failure in
connection with the First Expansion Premises, or (iii) with respect to the
Second Expansion Premises, but not the Initial Premises or the First Expansion
Premises, in the case of such failure in connection with the Second Expansion
Premises, and upon any such termination Landlord shall have all the rights
provided in Article IX of this Lease in the event of Tenant's default, or (b)
assess Tenant liquidated damages in an amount equal to the Annual Rent relating
to the portion of the Premises to which such failure relates divided by 365 for
each day such failure continues, which damages shall be paid to Landlord on the
Commencement Date.
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3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building. Either party may
inspect the work of the other at reasonable times and promptly shall give notice
of observed defects. Landlord's obligations under Section 3.1 shall be deemed
to have been performed (a) with respect to the Initial Premises, when Tenant
commences to occupy any portion of the Initial Premises for the Permitted Uses,
(b) with respect to the First Expansion Premises, when Tenant commences to
occupy any portion of the First Expansion Premises for the Permitted Uses, and
(c) with respect to the Second Expansion Premises, when Tenant commences to
occupy any portion of the Second Expansion Premises for the Permitted Uses, in
each case, however, with the exception of items which are incomplete or do not
conform with the requirements of Section 3.1 and as to which Tenant shall in
either case have given written notice to Landlord prior to such commencement.
If Tenant shall not have commenced to occupy the Initial Premises, the First
Expansion Premises or the Second Expansion Premises, as the case may be, for the
Permitted Uses within 30 days after they are deemed ready for occupancy as
provided in Section 3.2, a certificate of completion by a licensed architect or
registered engineer shall be conclusive evidence that Landlord has performed all
such obligations except for items stated in such certificate to be incomplete or
not in conformity with such requirements.
3.4 REPRESENTATIVES.
Each party authorizes the other to rely in connection with their respective
rights and obligations under this Article III upon approval and other actions on
the party's behalf by Landlord's Representative in the case of Landlord or
Tenant's Representative in the case of Tenant or by any person designated in
substitution or addition by notice to the party relying.
3.5 SIGNAGE.
Subject to Landlord's prior approval, Landlord will install on behalf of
Tenant signage conforming to Building Standards identifying Tenant at the
entrance to the Premises, on the tenant directory in the lobby serving the
Building, and on the exterior sign located at the intersection of Forbes Road
and Route 2A. Subject to Landlord's prior approval as to design and location,
Landlord will also install, at Tenant's sole cost, an exterior monument sign
visible from Forbes Road identifying Tenant. All signage must comply with all
local ordinances and design criteria and other applicable legal requirements.
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3.6 IMPROVEMENTS TO BUILDING LOBBY.
Landlord will recarpet and repaint the lobby to the Building and install
new lighting therein. Landlord shall consult with Tenant in selecting paint
colors, carpeting and lighting fixtures for the lobby before making a final
decision on such items. However, Landlord's decision shall be final. Landlord
agrees to (i) commence the lobby improvements within thirty (30) days after the
Commencement Date, and (ii) complete such improvements within forty-five (45)
days after the Commencement Date, in each case, subject to delays caused by
Tenant and other causes beyond Landlord's reasonable control.
ARTICLE IV
RENT
4.1 RENT.
Tenant agrees to pay rent to Landlord without any offset or reduction
whatever (except as made in accordance with the express provisions of this
Lease), equal to 1/12th of the Annual Base Rent in equal installments in advance
on the first day of each calendar month included in the Term; and for any
portion of a calendar month at the beginning or end of the Term, at the
proportionate rate payable for such portion, in advance.
4.2 OPERATING COSTS; ESCALATION.
Tenant's proportionate share of the Annual Estimated Operating Costs shall
be determined by multiplying Annual Estimated Operating Costs by a fraction, the
numerator of which is the Rentable Floor Area of Tenant's Space, and the
denominator of which is the Total Rentable Floor Area of the Building.
Tenant shall pay to Landlord, as additional rent, Operating Cost Escalation
(as defined below), if any, on or before the thirtieth day following receipt by
Tenant of Landlord's Statement (as defined below). As soon as practicable after
the end of each Fiscal Year ending during the Term and after Lease termination,
Landlord shall render a statement ("Landlord's Statement") in reasonable detail
and according to usual accounting practices certified by Landlord and showing
for the preceding Fiscal Year or fraction thereof, as the case may be,
Landlord's Operating Costs,
excluding the interest and amortization on mortgages for the Building and
Lot or leasehold interests therein and the cost of special services rendered to
tenants (including Tenant) for which a special charge is made,
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but including, without limitation: real estate taxes on the Building and
Lot; installments and interest on assessments for public betterments or public
improvements; expenses of any proceedings for abatement of taxes and assessments
with respect to any fiscal year or fraction of a fiscal year; premiums for
insurance; fees payable to third parties for financial audits of Landlord's
Operating Costs; compensation and all fringe benefits, worker's compensation
insurance premiums and payroll taxes paid by Landlord to, for or with respect to
all persons engaged in the operating, maintaining, or cleaning of the Building
and Lot; all utility charges not billed directly to tenants by Landlord or the
utility; payments to independent contractors under service contracts for
cleaning, operating, managing, maintaining and repairing the Building and Lot
(which payments may be to affiliates of Landlord provided the same are at
reasonable rates consistent with the type of occupancy and the managing agent
space for a building office on the ground floor or above; if the Building shares
common areas or facilities with another building or buildings, the Building's
pro rata share (as reasonably determined by Landlord) of the cost of cleaning,
operating, managing (including the cost of the management office for such
buildings and facilities), maintaining and repairing such common areas and
facilities; and all other reasonable and necessary expenses paid in connection
with the cleaning, operating, managing, maintaining and repairing of the
Building and Lot, or either, and properly chargeable against income, it being
agreed that if Landlord installs a new or replacement capital item for the
purpose of reducing Landlord's Operating Costs during the Term of the Lease, the
cost thereof as reasonably amortized by Landlord in accordance with generally
accepted accounting practices, with interest at the average prime commercial
rate in effect from time to time at the three largest national banks in Boston,
Massachusetts on the unamortized amount, shall be included in Landlord's
Operating Costs. Landlord's Statement shall also show the average number of
square feet of the Building which were occupied for the preceding fiscal year of
fraction thereof.
"Operating Cost Escalation" shall be equal to the difference, if any,
between:
(a) the product of Landlord's Operating Costs as indicated in Landlord's
Statement and a fraction, the numerator of which shall be the Rentable Floor
Area of Tenant's Space (adjusted to reflect the First Expansion Commencement
Date and the Second Expansion Commencement Date, where applicable) and the
denominator of which shall be one-half of the Total Rentable Floor Area of the
Building plus one-half of the average number of such square feet as are occupied
during such fiscal year or fraction thereof, and
(b) the product of the Annual Estimated Operating Costs (as reduced
pursuant to this Section 4.2 and Section 4.4) and a fraction, the numerator of
which shall be the Rentable Floor Area of Tenant's Space and the denominator of
which shall be the Total Rentable Floor Area of the Building.
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If the management fee is reduced by reason of a tenant's default in the
payment of Annual Rent or additional rent, Landlord shall reduce the Annual
Estimated Operating Costs by the amount of such reduction in the management fee.
In case of special services which are not rendered to all areas of a comparable
basis, the proportion allocable to the Premises shall be the same proportion
which the Rentable Floor Area of Tenant's Space bears to the total rentable
floor area to which such service is so rendered (such latter area to be
determined in the same manner as the Total Rentable Floor Area of the Building).
The term "real estate taxes" as used above shall mean all taxes of every
kind and nature assessed by any governmental authority on the Lot, the Building
and improvements, or both, which the Landlord shall become obligated to pay
because of or in connection with the ownership, leasing and operation of the
Lot, the Building and improvements, or both, subject to the following: There
shall be excluded from such taxes all income taxes, excess profits taxes, excise
taxes, franchise taxes, and estate, succession, inheritance and transfer taxes,
provided, however, that if at any time during the Term the present system of ad
valorem taxation of real property shall be changed so that in lieu of the whole
or any part of the ad valorem tax on real property, there shall be assessed on
Landlord a capital levy or other tax on the gross rents received with respect to
the Lot, Building and improvements, or both, or a federal, state, county,
municipal, or other local income, franchise, excise or similar tax, assessment,
levy or charge (distinct from any now in effect) measured by or based, in whole
or in part, upon any such gross rents, then any and all of such taxes,
assessments, levies or charges, to the extent so measured or based, shall be
deemed to be included within the term "real estate taxes."
Notwithstanding any other provision of this Section 4.2, if the Term
expires or is terminated as of a date other than the last day of a fiscal year,
then for such fraction of a fiscal year at the end of the Term, Tenant's last
payment to Landlord under this Section 4.2 shall be made on the basis of
Landlord's best and reasonable estimate of the items otherwise includable in
Landlord's Statement and shall be made on or before the later of (a) 10 days
after Landlord delivers such estimate to Tenant or (b) the last day of the Term,
with an appropriate payment or refund to be made upon submission of Landlord's
Statement.
4.3 ESTIMATED ESCALATION PAYMENTS.
If, with respect to any fiscal year or fraction thereof during the Term,
Landlord estimates that Tenant shall be obligated to pay Operating Cost
Escalation, then Tenant shall pay, as additional rent, on the first day of each
month of such fiscal year and each ensuing fiscal year thereafter, Estimated
Monthly Escalation Payments equal to 1/12th of the estimated Operating Cost
Escalation for the respective fiscal year, with an appropriate additional
payment or refund to be made within 30 days after Landlord's Statement is
delivered to Tenant. Landlord may adjust such Estimated
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Monthly Escalation Payment from time to time and at any time during a fiscal
year, and Tenant shall pay, as additional rent, on the first day of each month
following receipt of Landlord's notice thereof, the adjusted Estimated Monthly
Escalation Payment.
4.4 ELECTRICITY.
Tenant shall be responsible for paying its pro rata share of all
electricity charges relating to its use of the Premises as reasonably determined
by Landlord. Accordingly, the Annual Rent may be adjusted to reflect increases
in the Estimated Cost of Electrical Service to Tenant's Space. At Tenant's
option, if Tenant is in occupancy of the Total Rentable Floor Area of the
Building, Tenant may pay all electricity charges directly to the utility
providing electric service, provided that all payments are made prior to the
date that such charges are due. In the event that Tenant exercises such option,
Tenant shall no longer pay the Estimated Electrical Service to Tenant's Space or
other electrical costs to Landlord and the Annual Estimated Operating Costs
shall be reduced to reflect the decrease in Landlord's Operating Costs resulting
therefrom. Annual Base Rent shall not be adjusted.
4.5 CHANGE OF FISCAL YEAR.
Landlord shall have the right from time to time to change the periods of
accounting under Section 4.2 to any annual period other than a fiscal year, and
upon any such change all items referred to in this Section 4.4 shall be
appropriately apportioned. In all Landlord's Statements rendered under this
Section 4.4, amounts for periods partially within and partially without the
accounting periods shall be appropriately apportioned, and any items which are
not determinable at the time of a Landlord's Statement shall be included therein
on the basis of Landlord's estimate, and with respect thereto Landlord shall
render promptly after determination a supplemental Landlord's Statement, and
appropriate adjustment shall be made according thereto. All Landlord's
Statements shall be prepared on an accrual basis of accounting and in accordance
with generally acceptable accounting practices.
4.6 PAYMENTS.
All payments of Annual Rent and additional rent shall be made to Managing
Agent, or to such other person as Landlord may from time to time designate. If
any installment of Annual Rent or additional rent or on account of leasehold
improvements is paid more than 5 days after the due date thereof, at Landlord's
election, it shall bear interest at a rate equal to the average prime commercial
rate from time to time established by the three largest national banks in
Boston, Massachusetts plus 2% per annum from such due date, which interest shall
be immediately due and payable as further additional rent.
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ARTICLE V
LANDLORD' S COVENANTS
5.1 LANDLORD' S COVENANTS DURING THE TERM.
Landlord covenants during the Term:
5.1.1 Building Services - To furnish, through Landlord's employees or
independent contractors, the services listed in Exhibit B;
5.1.2 Additional Building Services - To furnish, through Landlord's
employees or independent contractors, reasonable additional Building operation
services upon reasonable advance request of Tenant at equitable rates from time
to time established by Landlord to be paid by Tenant, it being understood that
HVAC services for periods other than Monday through Friday from 8:00 a.m. to
6:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m. are additional building
services;
5.1.3 Repairs - Except as otherwise provided in Article VII, to make such
repairs to the roof, exterior walls, floor slabs, other structural components
and common facilities of the Building as may be necessary to keep them in good
and serviceable condition and repair; and
5.1.4 Quiet Enjoyment - That Landlord has the right to make this Lease and
that Tenant on paying the rent and performing its obligations hereunder shall
peacefully and quietly have, hold and enjoy the Premises throughout the Term
without any manner of hindrance or molestation from Landlord or anyone claiming
under Landlord, subject however to all the terms and provisions hereof;
5.1.5 Insurance - During the Term, Landlord shall maintain a policy or
policies of insurance covering loss or damage to the Premises, which shall
include such protection (i) as would normally be included for properties like
the Building and (ii) as is required by Landlord's lender. Such insurance shall
be in an amount at least equal to the full replacement cost of the Premises.
All proceeds under such policies shall be payable exclusively to Landlord or
Landlord's lender.
5.2 INTERRUPTIONS.
Except with respect to the gross negligence or willful misconduct of
Landlord, Landlord shall not be liable to Tenant for any compensation or
reduction of rent by reason of inconvenience or annoyance or for loss of
business arising from power losses or shortages or from the necessity of
Landlord's entering the Premises for any of the purposes in this Lease
authorized, or for repairing the Premises or any portion
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of the Building or Lot. In case Landlord is prevented or delayed from making any
repairs, alterations or improvements, or furnishing any service or performing
any other covenant or duty to be performed on Landlord's part, by reason of any
cause beyond Landlord's reasonable control, Landlord shall not be liable to
Tenant therefor, nor, except as expressly otherwise provided in Article VII,
shall Tenant be entitled to any abatement or reduction of rent by reason
thereof, nor shall the same give rise to a claim in Tenant's favor that such
failure constitutes actual or constructive total or partial, eviction from the
Premises.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such reasonable policies,
programs and measures as may be necessary, required or expedient for the
conservation or preservation of energy or energy services or as may be necessary
or required to comply with applicable codes, rules, regulations or standards.
ARTICLE VI
TENANT' S COVENANTS
6.1 TENANT' S COVENANTS DURING THE TERM.
Tenant covenants during the Term and such further time as Tenant occupies
any part of the Premises:
6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent and
additional rent, (b) all taxes which may be imposed on Tenant's personal
property in the Premises (including, without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, (c) all charges by public utilities
for telephone and other utility services (including service inspections
therefor) rendered to the Premises not otherwise required hereunder to be
furnished by Landlord without charge and not consumed in connection with any
services required to be furnished by Landlord without charge, and (d) as
additional rent, all charges to Landlord for services rendered pursuant to
Section 5.1.2 hereof.
6.1.2 Repairs and Yielding Up - Except as otherwise provided in Article VII
and Section 5.1.3, to keep the Premises in good order, repair and condition,
reasonable wear only excepted; and at the expiration or termination of this
Lease peaceably to yield up the Premises and all changes and additions therein
in such
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order, repair and condition, first removing all goods and effects of Tenant and
any items, the removal of which is required by agreement or specified herein to
be removed at Tenant's election and which Tenant elects to remove, and repairing
all damage caused by such removal and restoring the Premises and leaving them
clean and neat.
6.1.3 Occupancy and Use - Continuously from the Commencement Date, to use
and occupy the Premises only for the Permitted Uses; not to injure or deface the
Premises, Building, or Lot; and not to permit in the Premises any use thereof
which is improper, offensive, contrary to law or ordinances, or liable to create
a nuisance or to invalidate or increase the premiums for any insurance on the
Building or its contents or liable to render necessary any alteration or
addition to the Building; not to dump, flush, or in any way introduce any
hazardous substances or any other toxic substances into the septic, sewage or
other waste disposal system serving the Premises, not to generate, store or
dispose of hazardous substances in or on the Premises or dispose of hazardous
substances from the Premises to any other location without the prior written
consent of Landlord and then only in compliance with the Resource Conservation
and Recovery Act of 1976, as amended, 42 U.S.C. (S)6901 et seq., and all other
applicable laws, ordinances and regulations; to notify Landlord of any incident
which would require the filing of a notice under applicable federal, state, or
local law; not to store or dispose of hazardous substances on the Premises
without first submitting to Landlord a list of all such hazardous substances and
all permits required therefor and thereafter providing to Landlord on an annual
basis Tenant's certification that all such permits have been renewed with copies
of such renewed permits; and to comply with the orders and regulations of all
governmental authorities with respect to zoning, building, fire, health and
other codes, regulations, ordinances or laws applicable to the Premises.
"Hazardous substances" as used in this paragraph shall mean "hazardous
substances" as defined in the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, 42 U.S.C. (S)9601 and regulations adopted
pursuant to said Act.
6.1.4 Rules and Regulations - To comply with the Rules and Regulations set
forth in Exhibit C and all other reasonable Rules and Regulations hereafter made
by Landlord, of which Tenant has been given notice, for the care and use of the
Building and Lot and their facilities and approaches, it being understood that,
subject to the provisions at Section 5.1.4, Landlord shall not be liable to
Tenant for the failure of other tenants of the Building to conform to such Rules
and Regulations.
6.1.5 Safety Appliances - To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation of any public
authority because of any use made by Tenant and to procure all licenses and
permits so required because of such use and, if requested by Landlord, to do any
work so required because of such use, it being understood that the foregoing
provisions shall not be construed to broaden in any way Tenant's Permitted Uses.
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6.1.6 Assignment and Subletting - Not without the prior written consent of
Landlord to assign this Lease, which consent shall not be unreasonably withheld
or delayed, to make any sublease, or to permit occupancy of the Premises or any
part thereof by anyone other than Tenant, voluntarily or by operation of law (it
being understood that in no event shall Landlord consent to any such assignment,
sublease or occupancy if the same is on terms more favorable to the successor
occupant than to the then occupant); as additional rent, to reimburse Landlord
promptly for reasonable legal and other expenses incurred by Landlord in
connection with any request by Tenant for consent to assignment or subletting;
no assignment or subletting shall affect the continuing primary liability of
Tenant (which, following assignment, shall be joint and several with the
assignee); no consent to any of the foregoing in a specific instance shall
operate as a waiver in any subsequent instance. Landlord's consent to any
proposed assignment or subletting is required both as to the terms and
conditions thereof, and as to the creditworthiness of the proposed assignee or
subtenant and the consistency of the proposed assignee's or subtenant's business
with other uses and tenants in the Building. Landlord's consent to assignment
or subletting by Tenant shall not be unreasonably withheld, provided that Tenant
is not then in default under this Lease. In the event that any assignee or
subtenant pays to Tenant any amounts in excess of the Annual Rent and additional
rent then payable hereunder, or pro rata portion thereof on a square footage
basis for any portion of the Premises, Tenant shall promptly pay said excess
(net of reasonable costs incurred by Tenant in entering into such sublease or
assignment) to Landlord as and when received by Tenant. If Tenant requests
Landlord's consent to assign this Lease or sublet more than 50% of the Premises,
Landlord shall have the option, exercisable by written notice to Tenant given
within 10 days after receipt of such request, to terminate this Lease with
respect to the entire Premises in the case of a proposed assignment or a
sublease of the entire Premises or with respect to the portion of the Premises
proposed to be sublet in the case of a proposed sublease of less than the entire
Premises, such termination to be effective as of a date specified in such notice
which shall be not less than 30 or more than 60 days after the date of such
notice.
If, at any time during the Term of this Lease, Tenant is:
(i) a corporation or a trust (whether or not having shares of
beneficial interest) and there shall occur any change in the identity of the
majority of the persons then having power to participate in the election or
appointment of the directors, trustees or other persons exercising like
functions and managing the affairs of Tenant; or
(ii) a partnership or association or otherwise not a natural person
(and is not a corporation or a trust) and there shall occur any change in the
identity
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of any of the persons who then are members of such partnership or association or
who comprise Tenant;
Tenant shall so notify Landlord and Landlord may terminate this Lease by notice
to Tenant given within 90 days thereafter if, in Landlord's reasonable judgment,
the financial creditworthiness of Tenant is thereby impaired. This paragraph
shall not apply if the initial Tenant named herein is a corporation and the
outstanding voting stock thereof is listed on a recognized securities exchange.
6.1.7 Indemnity - To defend, with counsel approved by Landlord, which
appeal shall not be unreasonably withheld or delayed, all actions against
Landlord, any partner, trustee, stockholder, officer, director, employee or
beneficiary of Landlord, holders of mortgages secured by the Premises or the
Building and Lot and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and to pay, protect, indemnify and save
harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses damages, costs, expenses (including
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature (a) to which any Indemnified Party is subject
because of its estate or interest in the Premises, or (b) arising from (i)
injury to or death of any person, or damage to or loss of property, on the
Premises or on adjoining sidewalks, streets or ways, or connected with the use,
condition or occupancy of any thereof unless caused by the negligence of
Landlord or its servants or agents, (ii) violation of this Lease, or (iii) any
act, fault, omission, or other misconduct of Tenant or its agents, contractors,
licensees, sublessees or invitees.
6.1.8 Tenant's Liability Insurance - To maintain public liability insurance
on the Premises indemnifying Landlord and Tenant against all claims and demands
for (i) injury to or death of any person or damage to or loss of property, on
the Premises or adjoining walks, streets or ways, or connected with the use,
condition or occupancy of any thereof unless caused by the negligence of
Landlord or its servants or agents, (ii) violation of this Lease, or (iii) any
act, fault or omission, or other misconduct of Tenant or its agents,
contractors, licensees, sublessees or invitees, in amounts which shall, at the
beginning of the Term, be at least equal to the limits set forth in Section 1.1,
and from time to time during the Term, shall be for such higher limits, if any,
as are customarily carried in the area in which the Premises are located on
property similar to the Premises and used for similar purposes, and shall be
written on the "Occurrence Basis" and include Host Liquor liability insurance,
as reasonably necessary, and to furnish Landlord with certificates thereof.
6.1.9 Tenant's Worker's Compensation Insurance - To keep all of Tenant's
employees working in the Premises covered by worker's compensation insurance in
statutory amounts and to furnish Landlord with certificates thereof.
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6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's agents
entry: to examine the Premises at reasonable times and, if Landlord shall so
elect, to make repairs or replacements; to remove, at Tenant's expense, any
changes, additions, signs, curtains, blinds, shades, awnings, aerials,
flagpoles, or the like not consented to in writing; and to show the Premises to
prospective tenants during the 12 months preceding expiration of the Term and to
prospective purchasers and mortgagees at all reasonable times.
6.1.11 Loading - Not to place Tenant's Property, as defined in Section
6.1.13, upon the Premises so as to exceed a rate of 60 pounds of live load per
square foot and not to move any safe, vault or other heavy equipment in, about
or out of the Premises except in such manner and at such times as Landlord shall
in each instance approve; Tenant's business machines and mechanical equipment
which cause vibration or noise that may be transmitted to the Building structure
or to any other leased space in the Building shall be placed and maintained by
Tenant in settings of cork, rubber, spring, or other types of vibration
eliminators sufficient to eliminate such vibration or noise.
6.1.12 Landlord's Costs - In case Landlord shall be made party to any
litigation commenced by or against Tenant or by or against any parties in
possession of the Premises or any part thereof claiming under Tenant and to the
extent Landlord prevails in such litigation, to pay, as additional rent, all
costs including, without implied limitation, reasonable counsel fees incurred by
or imposed upon Landlord in connection with such litigation and, as additional
rent, also to pay all such costs and fees incurred by Landlord in connection
with the successful enforcement by Landlord of any obligations of Tenant under
this Lease.
6.1.13 Tenant's Property - All the furnishings, fixtures, equipment,
effects and property of every kind, nature and description of Tenant and of all
persons claiming by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under
Tenant, may be on the Premises or elsewhere in the Building or on the Lot shall
be at the sole risk and hazard of Tenant, and if the whole or any part thereof
shall be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes, or other pipes, by theft, or from any
other cause, no part of said loss or damage is to be charged to or to be borne
by Landlord unless due to the gross negligence of Landlord.
6.1.14 Labor or Materialmen's Liens - To pay promptly when due the entire
cost of any work done on the Premises by Tenant, its agents, employees, or
independent contractors; not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises; and
immediately to discharge any such liens which may so attach.
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6.1.15 Changes or Additions - Not to make any changes or additions to the
Premises without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed, provided that Tenant shall reimburse Landlord
for all out-of-pocket costs incurred by Landlord in reviewing Tenant's proposed
changes or additions, and provided further that, in order to protect the
functional integrity of the Building, all such changes and additions shall be
performed by contractors approved by Landlord, which approval shall not be
unreasonably withheld or delayed.
6.1.16 Holdover - To pay to Landlord the greater of 150% of (a) the then
fair market rent as conclusively determined by Landlord or (b) the total of the
Annual Rent and additional rent then applicable for each month or portion
thereof Tenant shall retain possession of the Premises or any part thereof after
the termination of this Lease, whether by lapse of time or otherwise, and also
to pay all damages sustained by Landlord on account thereof; the provisions of
this subsection shall not operate as a waiver by Landlord of the right of re-
entry provided in this Lease; at the option of Landlord exercised by a written
notice given to Tenant while such holding over continues, such holding over
shall constitute an extension of this Lease for a period of one year.
ARTICLE VII
CASUALTY AND TAKING
7.1 CASUALTY AND TAKING
In case during the Term all or any substantial part of the Premises,
Building, or Lot or any one or more of them, are damaged materially by fire or
any other cause or by action of public or other authority in consequence thereof
or are taken by eminent domain or Landlord receives compensable damage by reason
of anything lawfully done in pursuance of public or other authority, this Lease
shall terminate at Landlord's election, which may be made, notwithstanding
Landlord's entire interest may have been divested, by notice to Tenant within 30
days after the occurrence of the event giving rise to the election to terminate,
which notice shall specify the effective date of termination which shall be not
less than 30 nor more than 60 days after the date of notice of such termination.
If in any such case the Premises are rendered unfit for use and occupation and
the Lease is not so terminated, Landlord shall use due diligence to put the
Premises, or, in case of a taking, what may remain thereof (excluding any items
installed or paid for by Tenant which Tenant may be required or permitted to
remove) into proper condition for use and occupation to the extent permitted by
the net award of insurance or damages available to Landlord, and a just
proportion of the Annual Rent and additional rent according to the nature and
extent of the injury shall be abated until the Premises or such remainder shall
have been put by Landlord in such condition; and in case of a taking which
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permanently reduces the area of the Premises, a just proportion of the Annual
Rent and additional rent shall be abated for the remainder of the Term and an
appropriate adjustment shall be made to the Annual Estimated Operating Expenses.
In the event the Premises are not restored within 150 days from the date of such
casualty, Tenant shall have the right to terminate this Lease upon notice given
to Landlord within thirty (30) days after the expiration of such 150 day period.
7.2 RESERVATION OF AWARD.
Landlord reserves to itself any and all rights to receive awards made for
damages to the Premises, Building or Lot and the leasehold hereby created, or
any one or more of them, accruing by reason of exercise of eminent domain or by
reason of anything lawfully done in pursuance of public or other authority.
Tenant hereby releases and assigns to Landlord all Tenant's rights to such
awards, and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request, and hereby irrevocably designates and
appoints Landlord its attorney-in-fact to execute and deliver in Tenant's name
and behalf all such further assignments thereof. It is agreed and understood,
however, that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for (i) movable trade fixtures installed by Tenant
or anybody claiming under Tenant, at its own expense or (ii) relocation expenses
recoverable by Tenant from such authority in a separate action.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE.
This Lease is and shall continue to be subject and subordinate to any
presently existing mortgage or deed of trust of record covering the Lot or
Building or both (the "mortgaged premises"). The holder of any such presently
existing mortgage or deed of trust shall have the election to subordinate the
same to the rights and interests of Tenant under this Lease exercisable by
filing with the appropriate recording office a notice of such election,
whereupon the Tenant's rights and interests hereunder shall have priority over
such mortgage or deed of trust.
Unless the option provided for in the next following sentence shall be
exercised, this Lease shall be superior to and shall not be subordinate to, any
mortgage, deed of trust or other voluntary lien hereafter placed on the
mortgaged premises. The holder of any such mortgage, deed of trust or other
voluntary lien shall have the option to subordinate this Lease to the same,
provided that such holder enters into an agreement with Tenant by the terms of
which the holder will
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agree to recognize the rights of Tenant under this Lease and to accept Tenant as
tenant of the Premises under the terms and conditions of this Lease in the event
of acquisition of title by such holder through foreclosure proceedings or
otherwise and Tenant will agree to recognize the holder of such mortgage as
Landlord in such event, which agreement shall be made to expressly bind and
inure to the benefit of the successors and assigns of Tenant and of the holder
and upon anyone purchasing the mortgaged premises at any foreclosure sale. Any
such mortgage to which this Lease shall be subordinated may contain such terms,
provisions and conditions as the holder deems usual or customary.
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY.
The word "mortgage" as used herein includes mortgages, deeds of trust or
other similar instruments evidencing other voluntary liens or encumbrances, and
modifications, consolidations, extensions, renewals, replacements and
substitutes thereof. The word "holder" shall mean a mortgagee, and any
subsequent holder or holders of a mortgage. Until the holder of a mortgage
shall enter and take possession of the Premises for the purpose of foreclosure,
such holder shall have only such rights of Landlord as are necessary to preserve
the integrity of this Lease as security. Upon entry and taking possession of
the Premises for the purpose of foreclosure, such holder shall have all the
rights of Landlord. Notwithstanding any other provision of this Lease to the
contrary, including without limitation Section 10.4, no such holder of a
mortgage shall be liable, either as mortgagee or as assignee, to perform, or be
liable in damages for failure to perform any of the obligations of Landlord
unless and until such holder shall enter and take possession of the Premises for
the purpose of foreclosure, and such holder shall not in any event be liable to
perform or for failure to perform the obligations of Landlord under Section 3.1.
Upon entry for the purpose of foreclosure, such holder shall be liable to
perform all of the obligations of Landlord (except for the obligations under
Section 3.1), subject to and with the benefit of the provisions of Section 10.4,
provided that a discontinuance of any foreclosure proceeding shall be deemed a
conveyance under said provisions to the owner of the equity of the Premises.
8.3 MORTGAGEE'S ELECTION.
Notwithstanding any other provision to the contrary contained in this
Lease, if prior to substantial completion of Landlord's obligations under
Article III, any holder of a first mortgage on the mortgaged premises enters and
takes possession thereof for the purpose of foreclosing the mortgage, such
holder may elect, by written notice given to Tenant and Landlord at any time
within 90 days after such entry and taking of possession, not to perform
Landlord's obligations under Article III, and in such event such holder and all
persons claiming under it shall be relieved of all obligations to perform, and
all liability for failure to perform, said Landlord's obligations under
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Article III, and Tenant may terminate this Lease and all its obligations
hereunder by written notice to Landlord and such holder given within 30 days
after the day on which such holder shall have given its notice as aforesaid.
8.4 NO PREPAYMENT OR MODIFICATION, ETC.
Tenant shall not pay Annual Rent, additional rent, or any other charge more
than 10 days prior to the due date thereof, provided, however, that not more
than once during each calendar year included in the Term, Tenant may prepay any
portion of the Annual Rent, additional rent or other charges due and payable
under this Lease, provided such prepayment is made with respect to Annual Rent,
additional rent and other charges due and payable in the calendar year in which
the prepayment is to be received by Landlord. Except for the foregoing, no
prepayment of Annual Rent, additional rent or other charge, no assignment of
this Lease and no agreement to modify so as to reduce the rent, change the Term,
or otherwise materially change the rights of Landlord under this Lease, or to
relieve Tenant of any obligations or liability under this Lease, shall be valid
unless consented to in writing by Landlord's mortgagees of record, if any.
8.5 NO RELEASE OR TERMINATION.
No act or failure to act on the part of Landlord which would entitle Tenant
under the terms of this Lease, or by law, to be relieved of Tenant's obligations
hereunder or to terminate this Lease, shall result in a release or termination
of such obligations or a termination of this Lease unless (i) Tenant shall have
first given written notice of Landlord's act or failure to act to Landlord's
mortgagees of record, if any, specifying the act or failure to act on the part
of Landlord which could or would give basis to Tenant's rights and (ii) such
mortgagees, after receipt of such notice, have failed or refused to correct or
cure the condition complained of within a reasonable time thereafter, but
nothing contained in this Section 8.5 shall be deemed to impose any obligation
on any such mortgagee to correct or cure any such condition. "Reasonable time"
as used above means and includes a reasonable time to obtain possession of the
mortgaged premises, if the mortgagee elects to do so, and a reasonable time to
correct or cure the condition if such condition is determined to exist.
8.6 CONTINUING OFFER.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to
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this Lease as an obligee hereunder to the same extent as though its name were
written hereon as such; and such mortgagee shall be entitled to enforce such
provisions in its own name. Tenant agrees on request of Landlord to execute and
deliver from time to time any agreement which may reasonably be deemed necessary
to implement the provisions of this Article VIII.
8.7 MORTGAGEE'S APPROVAL.
Landlord's obligation to perform its covenants and agreements hereunder is
subject to the condition precedent that this Lease be approved by the holder of
any mortgage of which the Premises are a part and by the issuer of any
commitment to make a mortgage loan which is in effect on the date hereof.
Unless Landlord gives Tenant written notice within 30 business days after the
date hereof that such holder or issuer, or both, disapprove this Lease, then
this condition shall be deemed to have been satisfied or waived and the
provisions of this Section 5.7 shall be of no further force or effect.
ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT.
If any default by Tenant continues after notice, in case of Annual Rent,
additional rent, Tenant Improvement Reimbursement or any other monetary
obligation to Landlord for more than 10 days, or in any other case for more than
30 days and such additional time, if any, as is reasonably necessary to cure the
default if the default is of such a nature that it cannot reasonably be cured in
30 days and Tenant diligently endeavors to cure such default; or if Tenant
becomes insolvent, fails to pay its debts as they fall due, files a petition
under any chapter of the U.S. Bankruptcy Code, 11 U.S.C. 101 et seq., as it may
be amended (or any similar petition under any insolvency law of any
jurisdiction), or if such petition is filed against Tenant; or if Tenant
proposes any dissolution, liquidation, composition, financial reorganization or
recapitalization with creditors, makes an assignment or trust mortgage for
benefit of creditors, or if a receiver, trustee, custodian or similar agent is
appointed or takes possession with respect to any property of Tenant; or if the
leasehold hereby created is taken on execution or other process of law in any
action against Tenant; then, and in any such case, Landlord and the agents and
servants of Landlord may, in addition to and not in derogation of any remedies
for any preceding breach of covenant, immediately or at any time thereafter
while such default continues and without further notice, at Landlord's election,
do any one or more of the following: (1) give Tenant written notice stating that
the Lease is terminated, effective upon the giving of such notice or upon a date
stated in such
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notice, as Landlord may elect, in which event the Lease shall be irrevocably
extinguished and terminated as stated in such notice without any further action,
or (2) with or without process of law, in a lawful manner enter and repossess
the Premises as of Landlord's former estate, and expel Tenant and those claiming
through or under Tenant, and remove its and their effects, without being guilty
of trespass, in which event the Lease shall be irrevocably extinguished and
terminated at the time of such entry, or (3) pursue any other rights or remedies
permitted by law. Any such termination of the Lease shall be without prejudice
to any remedies which might otherwise be used for arrears of rent or prior
breach of covenant, and in the event of such termination Tenant shall remain
liable under this Lease as hereinafter provided. Tenant hereby waives all
statutory rights (including, without limitation, rights of redemption, if any)
to the extent such rights may be lawfully waived, and Landlord, without notice
to Tenant, may store Tenant's effects and those of any person claiming through
or under Tenant at the expense and risk of Tenant and, if Landlord so elects,
may sell such effects at public auction or private sale and apply the net
proceeds to the payment of all sums due to Landlord from Tenant, if any, and pay
over the balance, if any, to Tenant.
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION.
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
Annual Rent and all additional rent, the value of all other consideration agreed
to be paid or performed by Tenant for said residue. Tenant further covenants as
an additional and cumulative obligation after any such ending to pay punctually
to Landlord all the sums and perform all the obligations which Tenant covenants
in this Lease to pay and to perform in the same manner and to the same extent
and at the same time as if this Lease had not been terminated. In calculating
the amounts to be paid by Tenant under the next foregoing covenant, Tenant shall
be credited with any amount paid to Landlord as compensation as provided in the
first sentence of this Section 9.2 and also with the net proceeds of any rents
obtained by Landlord by reletting the Premises, after deducting all Landlord's
expenses in connection with such reletting, including, without implied
limitation, all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Premises for such reletting, it being
agreed by Tenant that Landlord may (i) relet the Premises or any part or parts
thereof for a term or terms which may at Landlord's option be equal to or less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant such concessions and free rent as Landlord in its sole
judgment considers advisable or necessary to relet the same and (ii) make such
alterations, repairs and decorations in the Premises as Landlord in its sole
judgment considers advisable or necessary to relet the same,
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and no action of Landlord in accordance with the foregoing or failure to relet
or to collect rent under reletting shall operate or be construed to release or
reduce Tenant's liability as aforesaid.
So long as at least 12 months of the Term remain unexpired at the time of
such termination, in lieu of any other damages or indemnity and in lieu of full
recovery by Landlord of all sums payable under all the foregoing provisions of
this Section 9.2, Landlord may by written notice to Tenant, at any time after
this Lease is terminated under any of the provisions contained in Section 9.1,
or is otherwise terminated for breach of any obligation of Tenant and before
such full recovery, elect to recover and Tenant shall thereupon pay, as
liquidated damages, an amount equal to the aggregate of the Annual Rent and
additional rent accrued under Article IV in the 12 months ended next prior to
such termination plus the amount of Annual Rent and additional rent of any kind
accrued and unpaid at the time of termination and less the amount of any
recovery by Landlord under the foregoing provisions of this Section 9.2 up to
the time of payment of such liquidated damages.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, or less than the amount of the loss or damages
referred to above.
ARTICLE X
MISCELLANEOUS
10.1 NOTICE OF LEASE.
Upon request of either party, both parties shall execute and deliver, after
the Term begins, a short form of this Lease in form appropriate for recording or
registration, and if this Lease is terminated before the Term expires, an
instrument in such form acknowledging the date of termination.
10.2 Intentionally Deleted
10.3 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such other address as Tenant
shall have last designated by notice in writing to Landlord and, if to Landlord,
at Landlord's Address or such other address as Landlord shall have last
designated by notice in
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<PAGE>
writing to Tenant. Any notice shall have been deemed duly given if mailed to
such address postage prepaid, registered or certified mail, return receipt
requested, when deposited with the U.S. Postal Service, or if delivered to such
address by hand, when so delivered.
10.4 BIND AND INURE.
The obligations of this Lease shall run with the land, and this Lease shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. The obligations of Landlord shall
be binding upon the assets of Landlord which comprise the Premises but not upon
other assets of Landlord. No individual partner, trustee, stockholder, officer,
director, employee or beneficiary of Landlord shall be personally liable under
this Lease and Tenant shall look solely to Landlord's interest in the Premises
in pursuit of its remedies upon an event of default hereunder, and the general
assets of the individual partners, trustees, stockholders, officers, employees
or beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
10.5 NO SURRENDER.
The delivery of keys to any employee of Landlord or to Landlord's agent or
any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.6 NO WAIVER, ETC.
The failure of Landlord or of Tenant to seek redress for violation of, or
to insist upon the strict performance of any covenant or condition of this Lease
or, with respect to such failure of Landlord, any of the Rules and Regulations
referred to in Section 6.1.4, whether heretofore or hereafter adopted by
Landlord, shall not be deemed a waiver of such violation nor prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation, nor shall the failure of
Landlord to enforce any of said Rules and Regulations against any other tenant
in the Building be deemed a waiver of any such Rules or Regulations. The
receipt by Landlord of Annual Rent or additional rent with knowledge of the
breach of any covenant of this Lease shall not be deemed a waiver of such breach
by Landlord, unless such waiver be in writing and signed by Landlord. No
consent or waiver, express or implied, by Landlord or Tenant to or of any breach
of any agreement or duty shall be construed as a waiver or consent to or of any
other breach of the same or any other agreement or duty.
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<PAGE>
10.7 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Annual Rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed as
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
10.8 CUMULATIVE REMEDIES.
The specific remedies to which Landlord may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which it may be lawfully entitled in case of any breach
or threatened breach by Tenant of any provisions of this Lease. In addition to
the other remedies provided in this Lease, Landlord shall be entitled to the
restraint by injunction of the violation or attempted or threatened violation of
any of the covenants, conditions or provisions of this Lease or to a decree
compelling specific performance of any such covenants, conditions or provisions.
10.9 LANDLORD'S RIGHT TO CURE.
If Tenant shall at any time default in the performance of any obligation
under this Lease, Landlord shall have the right, but shall not be obligated, to
enter upon the Premises and to perform such obligation, notwithstanding the fact
that no specific provision for such substituted performance by Landlord is made
in this Lease with respect to such default. In performing such obligation,
Landlord may make any payment of money or perform any other act. All sums so
paid by Landlord (together with interest at the rate of 4% per annum in excess
of the then average prime commercial rate of interest being charged by the three
largest national banks in Boston, Massachusetts) and all necessary incidental
costs and expenses in connection with the performance of any such act by
Landlord, shall be deemed to be additional rent under this Lease and shall be
payable to Landlord immediately on demand. Landlord may exercise the foregoing
rights without waiving any other of its rights or releasing Tenant from any of
its obligations under this Lease.
10.10 ESTOPPEL CERTIFICATE.
Tenant agrees, from time to time, upon not less than 15 days' prior written
request by Landlord, to execute, acknowledge and deliver to Landlord a statement
in writing certifying that this Lease is unmodified and in full force and
effect; that Tenant has no defenses, offsets or counterclaims against its
obligations to pay the Annual Rent and additional rent and to perform its other
covenants under this Lease;
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<PAGE>
that there are no uncured defaults of Landlord or Tenant under this Lease (or,
if there have been modifications, that this Lease is in full force and effect as
modified and stating the modifications, and, if there are any defenses, offsets,
counterclaims, or defaults, setting them forth in reasonable detail); and the
dates to which the Annual Rent, additional rent and other charges have been
paid. Any such statement delivered pursuant to this Section 10.10 shall be in a
form reasonably acceptable to and may be relied upon by any prospective
purchaser or mortgagee of premises which include the Premises or any prospective
assignee of any such mortgagee.
10.11 WAIVER OF SUBROGATION.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
10.12 ACTS OF GOD.
In any case where either party hereto is required to do any act, delays
caused by or resulting from Acts of God, war, civil commotion, fire, flood or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which work shall be completed, whether such time be designated by a fixed date,
a fixed time or a "reasonable time", and such time shall be deemed to be
extended by the period of such delay.
10.13 BROKERAGE.
Tenant represents and warrants that it has dealt with no broker in
connection with this transaction other than Spaulding and Slye Colliers Limited
Partnership and agrees to defend, with counsel approved by Landlord, indemnify
and save Landlord harmless from and against any and all cost, expense or
liability for any compensation, commissions or charges claimed by a broker or
agent, other than Spaulding and Slye Colliers Limited Partnership, with respect
to Tenant's dealings in connection with this Lease.
10.14 SUBMISSION NOT AN OFFER.
The submission of a draft of this Lease or a summary of some or all of its
provisions does not constitute an offer to lease or demise the Premises, it
being
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<PAGE>
understood and agreed that neither Landlord nor Tenant shall be legally bound
with respect to the leasing of the Premises unless and until this Lease has been
executed by both Landlord and Tenant and a fully executed copy has been
delivered to each of them.
10.15 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the laws
of the state in which the Premises are located. If any term, covenant,
condition or provision of this Lease or the application thereof to any person or
circumstances shall be declared invalid or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall not be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the findings of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and assigns, and those
claiming through or under them respectively. If there be more than one tenant,
the obligations imposed by this Lease upon Tenant shall be joint and several.
ARTICLE XI
SECURITY DEPOSIT
Upon execution of the Lease, Tenant shall provide to Landlord either a cash
deposit in the amount of the Security Deposit or an irrevocable and
unconditional letter of credit in the amount of the Security Deposit (in either
case, the "Security Deposit") issued by a bank or other institution satisfactory
to Landlord in its sole discretion and in a form satisfactory to Landlord in its
sole discretion, naming Landlord, its successors and assigns as the beneficiary
and expiring no sooner than
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<PAGE>
thirty (30) days after the Term Expiration Date (the "Letter of Credit").
Landlord shall be permitted to draw upon the Letter of Credit in the event of
(i) default by Tenant in any of its obligations hereunder, in which event
Landlord may draw upon all or~a portion of the Letter of Credit and apply the
proceeds to cure such default, or (ii) in the event the Tenant exercises its
Option to Extend hereunder, failure by Tenant to provide to Landlord, no less
than 30 days prior to the expiration date of the Letter of Credit then held by
Landlord, a replacement or substitute Letter of Credit in the same amount as the
original Letter of Credit, as it may be reduced hereunder, and otherwise subject
to the conditions set forth above, which expires no sooner than thirty (30) days
after the Term Expiration Date as extended in accordance with Tenant's exercise
of its Option to Extend, in which event Landlord may draw upon all of the Letter
of Credit and hold the cash proceeds thereof as the Security Deposit hereunder.
In either case, the Security Deposit shall be held by Landlord as security,
without interest, for and during the Term and provided no default has occurred
hereunder, the Security Deposit shall be returned to Tenant at the termination
of the Lease. Notwithstanding the foregoing, the Security Deposit shall be
reduced [by $15,000] on January 1, 2000, or as soon as reasonably practicable
thereafter, so long as no default has occurred hereunder and that a substitute
letter of credit is provided to Landlord, if necessary, in the amount of the
Letter of Credit as reduced and otherwise satisfying the conditions set forth
above. If all or any part of the Security Deposit is applied to an obligation of
Tenant hereunder, Tenant shall immediately upon request by Landlord restore the
Security Deposit to its original amount. Tenant shall not have the right to call
upon Landlord to apply all or any part of the Security Deposit to cure any
default or fulfill any obligation of Tenant, but such use shall be solely in the
discretion of Landlord. Upon any conveyance by Landlord of its interest under
this Lease, the Security Deposit may be delivered by Landlord to Landlord's
grantee or transferee. Upon any such delivery, Tenant hereby releases Landlord
herein named of any and all liability with respect to the Security Deposit, its
application and return, and Tenant agrees to look solely to such grantee or
transferee. It is further understood that this provision shall also apply to
subsequent grantees and transferees.
EXECUTED as a sealed instrument in two or more counterparts on the day and
year first above written.
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<PAGE>
LANDLORD
TRUSTEES OF LEXINGTON
DEVELOPMENT COMPANY TRUST
By: Spaulding and Slye Services Limited
Partnership, authorized agent
By: Spaulding and Slye Real
Estate Services Company, Inc.
By:__________________________
Name:
Title:
TENANT:
LINKAGE, INC.
By:____________________________________
Name:_____________________________
(please print or type)
Title:____________________________
(please print or type)
A copy of Tenant's corporate authorization
for such execution is attached hereto.
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<PAGE>
EXHIBIT A-l
Plan Showing Tenant's Space as of the Commencement Date
-------------------------------------------------------
[Section intentionally omitted; available upon request to Linkage Solutions,
Inc.]
EXHIBIT A-2
Plan Showing Tenant's Space as of the
-------------------------------------
First Expansion Commencement Date
---------------------------------
[Section intentionally omitted; available upon request to Linkage Solutions,
Inc.]
EXHIBIT A-3
Plan Showing Tenant's Space as of the
-------------------------------------
Second Expansion Commencement Date
----------------------------------
[Section intentionally omitted; available upon request to Linkage Solutions,
Inc.]
<PAGE>
EXHIBIT B
25 MALL ROAD
BUILDING STANDARD MATERIALS
[Section intentionally omitted; available upon request to Linkage Solutions,
Inc.]
EXHIBIT C
LANDLORD'S SERVICES
[Section intentionally omitted; available upon request to Linkage Solutions,
Inc.]
<PAGE>
Exhibit 10.7
AMENDED AND RESTATED SERVICES AGREEMENT
---------------------------------------
This Amended and Restated Services Agreement (the "Agreement") dated as of
March __, 1999, amends and restates the Services Agreement dated as of November
11, 1997 (the "Original Agreement") between Warren Bennis ("Professor Bennis"),
an individual residing in Santa Monica, California, and Linkage, Inc.
("Linkage"), a corporation organized under the laws of Massachusetts with its
principal place of business located at One Forbes Road, Lexington,
Massachusetts.
WHEREAS, Linkage desires that Professor Bennis serve as the "thought
leader" for Linkage's educational and consulting business concerning the subject
of leadership, and Professor Bennis desires to serve in that capacity;
NOW THEREFORE, in consideration of the terms and provisions contained
herein, and for good and fair consideration, the receipt and adequacy of which
is expressly acknowledged, Professor Bennis and Linkage do agree as follows:
1. Term. This Agreement shall commence on January 1, 1998 and shall
----
remain in effect until December 31, 1999. The parties may extend or renew this
Agreement beyond this initial two-year term, but only if they mutually agree to
do so in writing.
2. Professor Bennis's Services to Linkage. Pursuant to this Agreement,
--------------------------------------
Professor Bennis shall provide Linkage with twenty (20) days of service per year
for each of the two years that this Agreement is in effect, i.e., forty (40)
days of service in total over the term of the Agreement. In providing this
service, Professor Bennis shall serve as Linkage's "thought leader" concerning
the subject of leadership, helping Linkage create and deliver an array of
products, programs, and services relating to leadership. Professor Bennis'
specific responsibilities in this role shall include the following:
a. Co-Chair of The Global Institute For Leadership Development.
-----------------------------------------------------------
Professor Bennis shall serve as the co-chair of The Global Institute For
Leadership Development (the "Global Institute"), Linkage's division that offers
and presents high-end leadership programs, products, and services, by providing
overall guidance and support and attending (1) the Global Institute's annual
"Emerging Leader Program," to take place in Palm Desert, California from
December 6-11, 1998 and then a week in late 1999, as well; (2) the Global
Institute's annual program concerning the subject of "Leadership Teams", to take
place for a week in late 1998 (tentatively, September 9-11, 1998 in the Southern
California area) and then a week in 1999, as well; and (3) any other Global
Institute programs or products that may be developed and that may be appropriate
for Professor Bennis' involvement. With respect to each of the Global Institute
programs listed above, Professor Bennis shall participate in program development
and delivery by adding input to the program design, lining up various
<PAGE>
CEO-type speakers, delivering keynotes, and serving as an on-site presence
(introducing speakers, providing guidance, etc.).
b. Conference Keynoter. In addition to delivering keynotes at
-------------------
Global Institute events as noted above, Professor Bennis shall deliver keynote
addresses at four Linkage conferences per year for each year that this Agreement
is in effect. For the first year of the Agreement (1/1/98-12/31/98), these four
conferences are as follows:
<TABLE>
<S> <C> <C>
1. May 6-7, 1998 The Best of TEAMS '98 Chicago, IL
Conference
2. June 8-11, 1998 The Leadership San Francisco, CA
Development Conference
3. October 6-7, 1998 The European Leadership Amsterdam
Development Conference
4. November 9-12, The Asian Leadership Hong Kong
1998 (tentative) Development Conference
</TABLE>
For the second year of the Agreement (1/1/99-12/31/99), Professor Bennis shall
deliver keynotes at four additional Linkage conferences, the specific events and
dates to be set by Linkage at a later date.
3. Compensation. In consideration of the 20 days of service per year
------------
that Professor Bennis shall provide Linkage (as outlined above), Linkage shall
compensate Professor Bennis as follows:
a. Fee for Services. Linkage shall pay Professor Bennis a sum of
----------------
$250,000 per year (i.e., $500,000 over the term of this Agreement). Linkage
shall pay Professor Bennis this sum in 24 monthly installments of twenty
thousand eight hundred thirty three dollars and thirty three cents ($20,833.33),
with the first installment being due on or about February 1, 1998 and the final
installment being due on or about January 1, 2000.
b. Incentive Payments for Program/Product Ideas. Linkage shall
--------------------------------------------
provide Professor Bennis with certain incentive and bonus payments for any new
leadership-related ideas that he creates and develops that can be converted into
a Linkage program, product, or service. These ideas may be in the form of a new
leadership program, a new leadership tool, or some other leadership-based
program or product. Because it is unclear what form these products or programs
may take, Linkage shall set the specific incentives for creating and developing
each on a mutually agreeable, case-by-case basis at the front end of the
project.
-2-
<PAGE>
4. Expenses. Linkage shall reimburse Professor Bennis for all of the
--------
actual and reasonable travel expenses that he incurs with respect to the various
Linkage leadership programs and conferences in which he participates pursuant to
this Agreement. Linkage shall reimburse Professor Bennis for such actual and
reasonable expenses within thirty (30) days of the delivery of the bill
therefor. Linkage shall use its best efforts to try to minimize the amount that
Professor Bennis has to travel beyond his various on-site obligations.
5. Optional Consulting. Linkage may approach Professor Bennis from time
-------------------
to time with additional consulting and client work concerning leadership.
Professor Bennis shall perform this consulting work only if it is acceptable and
convenient for him. If accepted, the parties agree that this additional client
work shall not count as part of his 20 days of services to Linkage per year (see
paragraph 2 above), nor will it be compensated by Linkage as part of the payment
schedule set forth above in paragraph 3. Instead, if any of this work arises
(and is accepted by Professor Bennis), Linkage shall pay Professor Bennis at the
rate of $10,000 per day.
6. Termination. Either party may terminate this Agreement in whole or in
-----------
part at any time by written notice to the other, but only for cause; such notice
is effective upon receipt.
7. Proprietary Rights and Nondisclosure. Professor Bennis and Linkage
------------------------------------
recognize each other's proprietary rights and the confidential nature of each
other's materials and information and agree to take every precaution to
safeguard and treat these materials and information as confidential. Each party
further agrees that it will not make use of, either directly or indirectly, any
of the materials or information that it received or has received from the other
party other than for the purpose for which such information has been disclosed,
except with prior written permission from the other party.
8. Ownership of Documents. All services that Professor Bennis renders
----------------------
for Linkage in connection with this Agreement, including but not limited to the
new ideas for programs and products referenced in paragraph 3(b) above, shall be
the sole property of Linkage.
9. Resolution of Disputes. Any controversy or claims arising out of or
----------------------
relating to this Agreement shall be settled by arbitration in accordance with
the rules of the American Arbitration Association (AAA). The decision and award
may be entered in any court or tribunal having jurisdiction thereof.
10. Assignment. Neither this Agreement nor any interest herein nor
----------
obligations hereunder may be assigned, in whole or in part, by either party
hereto without the prior written consent of the other party.
-3-
<PAGE>
11. Merger and Amendment. This writing constitutes the entire agreement
--------------------
of the parties hereto. The Original Agreement is hereby terminated and shall be
of no further force or effect. There are no understandings, written or oral,
relating to the subject matter hereof, except as expressly set forth herein.
The parties have read this Agreement completely, have had the opportunity to
obtain the advice of counsel, and have not been influenced to any extent
whatsoever by any representations or statements made by any party or its agents
other than those combined in this Agreement. This Agreement shall not be
modified except by a subsequently dated written amendment hereto, signed on
behalf of each party by a duly authorized representative.
12. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts.
13. Relationship of Parties. The parties hereto are independent
-----------------------
contractors and neither party is an employee, agent, partner or joint venturer
of the other. Neither party shall have the right to bind the other to any
agreement with a third party; to represent itself as an employee, agent, partner
or joint venturer of the other; or to incur any obligation or liability on
behalf of the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
/WARREN BENNIS/_______________
---------------
Warren Bennis
LINKAGE
By: /PHILIP HARKINS/____________
Name: Philip Harkins
Title: President
-4-
<PAGE>
EXHIBIT 10.8
TAX INDEMNIFICATION AGREEMENT
THIS TAX INDEMNIFICATION AGREEMENT, dated as of ________, 1999, is entered
into by Linkage, Inc., a Massachusetts corporation (the "Company"), and the
individuals set forth on Schedule A hereto (individually, a "Stockholder" and
collectively, the "Stockholders");
RECITALS:
WHEREAS, the Stockholders hold all of the outstanding shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock").
WHEREAS, the Company has elected to be taxed as an S corporation under the
Code.
WHEREAS, the Company's affiliate, Linkage Solutions, Inc., a Delaware
corporation, is now contemplating offering and selling shares of its common
stock to the public (the "Public Offering").
WHEREAS, the Company plans, just prior to the completion of the Public
Offering, to terminate its S corporation election.
WHEREAS, after the termination of the Company's S corporation election, the
Stockholders individually will continue to be liable for their own federal,
state, and local income taxes on the Company's Tax Items that pass through to
the Stockholders under the provisions of Subchapter S of the Code and any
similar provisions of state and local law for all periods prior to the time the
Company ceases to be an S Corporation. The Company will be subject to a
corporate level tax under Subchapter C of the Code and certain state and local
taxing statutes for periods thereafter. The purpose of this Agreement is to set
forth the agreement of the Company and the Stockholders with respect to certain
adjustments to the federal, state and local personal income tax liability of the
Stockholders attributable to Tax Items of the Company that pass through to the
Stockholders under the provisions of Subchapter S of the Code and any similar
provisions of state and local law for periods during which the Company is an S
Corporation.
NOW, THEREFORE, for good and valuable consideration, the receipt and legal
sufficiency of which hereby are acknowledged, the parties agree as follows:
<PAGE>
Article I
DEFINITIONS
Section 1.1 For purposes of this Agreement the following definitions
shall apply:
(a) "Adjustment" shall mean any proposed or final change in any S
Corporation Tax Liability initiated by the IRS, state or local taxing authority
or any other relevant taxing authority.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended and
in effect for the taxable period in question.
(c) "Final Determination" shall mean the final resolution of any Income
Tax liability (including all related interest and penalties) for a taxable
period. A Final Determination shall result from the first to occur of:
(i) the expiration of thirty (30) days after IRS acceptance of a
Waiver, unless, within such period, the taxpayer gives notice to the other
of the taxpayer's intention to attempt to recover all or part of any amount
paid pursuant to the Waiver by the filing of a timely claim for refund;
(ii) a decision, judgment, decree or other order by a court of
competent jurisdiction that is not subject to further judicial review (by
appeal or otherwise) and has become final;
(iii) the execution of a closing agreement under section 7121 of the
Code or the acceptance by the IRS or its counsel of an offer in compromise
under section 7122 of the Code or comparable agreements under the laws of
other jurisdictions;
(iv) the expiration of the time for filing a claim for refund or for
instituting suit in respect of a claim for refund disallowed in whole or
part by the IRS or other relevant taxing authority;
(v) any other final disposition of the tax liability for such period
by reason of the expiration of the applicable statute of limitations; or
(vi) any other event that the parties agree is a final and irrevocable
determination of the liability at issue.
(d) "Income Tax" shall mean federal income taxes and state and local
taxes imposed upon, or measured by, income. Income Tax includes interest,
penalties, additions to tax and additional amounts and any related professional
or other expenses.
-2-
<PAGE>
(e) "IRS" shall mean the United States Internal Revenue Service or any
successor, including, but not limited to, its agents, representatives and
attorneys.
(f) "Pro Rata Share" shall mean each Stockholder's proportionate share of
Common Stock owned on the relevant date or held during the relevant period,
which proportionate share shall be a fraction, the numerator of which is the
number of shares of Common Stock held by the Stockholder on the relevant date or
during the relevant period and the denominator of which is the number of shares
of Common Stock held by all Stockholders as of the relevant date or during the
relevant period.
(g) "S Corporation" shall mean an S Corporation within the meaning of
section 1361 of the Code.
(h) "S Corporation Tax Liability" shall mean the personal Income Tax
liability of a Stockholder for Income Taxes attributable to (a) the Company's
Tax Items that pass through to the Stockholder under the provisions of
Subchapter S of the Code and any similar provisions of state and local law or
(b) a Stockholder's receipt of indemnity payments hereunder.
(i) "Tax Benefit" shall mean a reduction in the personal Income Tax
liability of a Stockholder (as a result of Tax Items of the Company and all
other Tax Items reflected on the Stockholder's tax return) or a reduction in
the Income Tax liability of the Company for any taxable period. The Stockholder
or the Company shall be deemed to have realized or received a Tax Benefit from a
Tax Item in a taxable period only if and to the extent that the Stockholder's
personal Income Tax liability or the Company's Income Tax liability for such
period is less than it would have been if such liability were determined without
regard to such Tax Item. The Stockholder or the Company shall be deemed to have
realized or received a Tax Benefit with respect to a carryover only if, when and
to the extent the carryover is used to produce a Tax Benefit.
(j) "Tax Item" shall mean any item of income, gain, loss, deduction,
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable by the Stockholder (when the Company is an S
Corporation) or by the Company.
(k) "Waiver" shall mean a Waiver of Restrictions on Assessment and
Collection of Deficiency in Tax and Acceptance of Overassessment on Federal
Revenue Form 870 or 870-AD (or any successor comparable form or the expiration
of a comparable period with respect to any comparable agreement or form under
the laws of other jurisdictions).
Article II
INDEMNIFICATION FOR CERTAIN TAXES
Section 2.1 Each Stockholder severally, but not jointly, shall pay to
the Company an amount equal to any Tax Benefit realized or received by such
Stockholder arising from an
-3-
<PAGE>
Adjustment with respect to a Tax Item of the Company for any taxable period in
which the Company was taxable as an S Corporation.
Section 2.2 If, based on a Final Determination, the Company is deemed to
have been a C corporation for federal, state or local income tax purposes during
any period in which it reported (or intends to report) its taxable income as an
S corporation, each Stockholder severally, but not jointly, agrees to contribute
to the capital of the Company his or her Pro Rata Share of the amount necessary
to hold the Company harmless from any taxes (net of any refunds) and interest
arising from such Final Determination. The obligations of a Stockholder under
this Section 2.2 shall include his or her Pro Rata Share of all taxes (net of
any refunds) and interest incurred by the Company as a C Corporation for periods
ending before the date of termination of the Company S election (the
"Termination Date"), other than any obligation arising from an adjustment to the
Company's tax return for a period ending before the Termination Date which, if
the Company had been an S corporation for such period, would have given rise to
an obligation of the Company to the Stockholder under Section 2.3 hereof. Each
Stockholder's obligation under this Section 2.2 shall be limited to the total
distributions to the Stockholder made by the Company through and including the
Termination Date, reduced by any taxes (net of any refunds) and interest of the
Stockholder attributable to such distributions.
Section 2.3 The Company shall pay to the Stockholders an amount equal to
any Tax Benefit realized or received by the Company arising from an Adjustment
with respect to a Tax Item of the Company for any taxable period in which the
Company was taxable as an S Corporation.
Section 2.4 Any payment required under this Article II shall be made by
the earlier of (i) thirty (30) days after a Stockholder receives a refund or
credit, (ii) thirty (30) days after a Final Determination with respect to such
tax, (iii) with respect to a carry over, thirty (30) days after a Stockholder
files a tax return on which the carryover produces a Tax Benefit, or
(iv) thirty (30) days after the determination by the parties or pursuant to
Article IV that such payment is due.
Article III
COOPERATION AND EXCHANGE OF INFORMATION
Section 3.1 Whenever any Stockholder or the Company becomes aware of an
issue which it believes gives rise to payment or indemnification from the other
party under Article II, the Stockholder or the Company (as the case may be)
shall promptly give notice of the
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<PAGE>
issue to the other party. The Company shall provide copies of any such notice it
gives or receives under this Section 3.1 to each of the Stockholders within ten
(10) days after giving or receiving such notice. The indemnitor and its
representatives, at the indemnitor's expense, shall be entitled to participate
in all conferences, meetings or proceedings with the IRS or other taxing
authority with respect to the issue. If the indemnitor is more than one
Stockholder, the Stockholders liable to provide such indemnification shall agree
among themselves upon one representative to participate in such conferences,
meetings and proceedings with the Company, the IRS or the applicable taxing
authority.
Section 3.2 The parties agree to consult and cooperate with each other
in the negotiation and settlement or litigation of any Adjustment that may give
rise to any payment or an indemnification obligation under this Agreement. All
decisions with respect to such negotiation and settlement or litigation shall be
made by the parties after full, good faith consultation or pursuant to the
dispute resolution provisions set forth in Article IV hereof. No such
representative of the Stockholders shall be permitted to settle any litigation
or agree to any Adjustment or indemnification payment without the prior consent
of the Stockholders whose combined Pro Rata Shares exceed fifty percent (50%) of
the outstanding number of shares of Common Stock held by all Stockholders as of
the relevant date or the period in controversy.
Article IV
DISPUTES
Section 4.1 If the parties are, after negotiation in good faith, unable
to agree upon the appropriate application of this Agreement, the controversy
shall be settled by the accounting firm remaining on the list of firms set forth
on Schedule B hereto after the Company and the representative of the
Stockholders, commencing with the Company, shall have objected seriatim to the
other firms on the list (the "Accounting Firm"). The decision of the Accounting
Firm shall be final, and each of the Company and the Stockholders agree
immediately to pay to the other any amount due under this Agreement pursuant to
such decision. The expenses of the Accounting Firm shall be borne one-half by
the Company and one-half by the Stockholders, on a Pro Rata Share basis, unless
the Accounting Firm specifies otherwise.
Article V
MISCELLANEOUS
Section 5.1 Term of Agreement. This Agreement shall become effective as
of the date of its execution and shall continue in full force and effect
indefinitely.
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<PAGE>
Section 5.2 Severability. If any term of this Agreement is held by a
court of competent jurisdiction to be unenforceable, the remainder of the terms
set forth herein shall remain in full force and effect and shall in no way be
impaired. The parties stipulate that they would have executed the remaining
terms without including any which may hereafter be declared unenforceable. In
the event that any term is held to be unenforceable, the parties shall use their
best efforts to find an alternative means to achieve the same or substantially
the same result as that contemplated by such term.
Section 5.3 Assignment. Except by operation of law or in connection with
the sale of all or substantially all the assets of a party, this Agreement shall
not be assignable, in whole or in part, directly or indirectly, by any
Stockholder without the written consent of the Company or by the Company without
the written consent of the Stockholders whose combined Pro Rata Shares exceed
fifty percent (50%) of the outstanding number of shares of Common Stock held by
all Stockholders at the time such consent is requested. Any attempt to assign
any right or obligations arising under this Agreement without such consent shall
be void. However, the provisions of this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and permitted assigns.
Section 5.4 Further Assurances. Subject to the provisions of this
Agreement, the parties shall acknowledge such other instruments and documents,
and take all other actions, as may be reasonably required in order to effectuate
the purposes of this Agreement.
Section 5.5 Parties in Interest. Except as herein otherwise specifically
provided, nothing in this Agreement expressed or implied is intended to confer
any right or benefit upon any person, firm or corporation other than the parties
and their respective successors and permitted assigns.
Section 5.6 Waivers, Etc. No failure or delay on the part of any party
in exercising any power or right under this Agreement shall operate as a waiver
thereof , nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement nor
consent to any departure by any party therefrom shall in any event be effective
unless it shall be in writing, and then such waiver or consent shall be
effective only in the specific instance and for the purpose which given.
Section 5.7 Set-off. All payments to be made by any party under this
Agreement shall be made without set-off, counterclaim or withholding, all of
which are expressly waived.
Section 5.8 Change of Law. If, due to any change in applicable law or
regulation or the interpretation thereof by any court or other governing body
having jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement shall be impracticable or impossible, the parties
shall use their best efforts to find alternative
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<PAGE>
means to achieve the same or substantially the same results as are contemplated
by such provision.
Section 5.9 Headings. Descriptive headings are for convenience only and
shall not control or affect the meaning of any provision of this Agreement.
Section 5.10 Counterparts. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by the parties and each
executed counterpart shall be an original instrument.
Section 5.11 Notices. All notices provided for in this Agreement shall be
validly given if in writing and (i) delivered personally or (ii) sent by
registered mail, postage prepaid, return receipt registered to the address set
forth below:
If to the Company:
Linkage, Inc.
One Forbes Road
Lexington, MA 02173
Attn: President
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Hal J. Leibowitz, Esq.
If to a Stockholder:
c/o the Company
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner to each other party hereto. Notice given
in person shall be deemed delivered when received (or when delivery is first
refused) and notice given by mail shall be deemed delivered five (5) calendar
days after the date mailed.
Section 5.12 Governing Law. This Agreement shall be governed by the
domestic substantive laws of the State of Delaware without regard to any choice
or conflict of laws rule or provision that would cause the application of the
domestic substantive laws of any other jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Tax Indemnification
Agreement to be duly executed as of the day and year first written above.
LINKAGE, INC.
By: ___________________________
Philip J. Harkins
President
STOCKHOLDERS
______________________________
Philip J. Harkins
______________________________
Larry R. Carr
______________________________
David Giber
______________________________
Todd Langton
______________________________
James Harkins
______________________________
Richard Rosier
______________________________
Scott Cohen
-8-
<PAGE>
______________________________
Michelle Bryan
______________________________
Ellen Rosenberg
______________________________
Martha Brown
______________________________
Mark Hannum
______________________________
Michelle Zarella
______________________________
Ellen Wingard
______________________________
James Kane
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<PAGE>
Schedule A
STOCKHOLDERS
Philip J. Harkins
Larry R. Carr
David Giber
Todd Langton
James Harkins
Richard Rosier
Scott Cohen
Michelle Bryan
Ellen Rosenberg
Martha Brown
Mark Hannum
Michelle Zarella
Ellen Wingard
James Kane
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<PAGE>
Schedule B
ACCOUNTING FIRMS
Arthur Andersen LLP
KPMG Peat Marwick LLP
Deloitte & Touche LLP
PricewaterhouseCoopers LLP
Ernst & Young LLP
-11-
<PAGE>
EXHIBIT 11
Linkage Solutions, Inc
Computation of Net Income per Common Share
Years Ended December 31, 1996, 1997 and 1998
(In Thousands except per share data)
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
BASIC NET INCOME PER COMMON SHARE
Net Income as reported.................................... $1,442,836 $1,929,766 $9,904,908
Preferential Distribution................................. - - 6,339,684
---------- ---------- ----------
Net Income Available to Common Stockholders............... 1,442,836 1,929,766 3,565,224
Weighted average number of common shares outstanding:
Common Stock............................................ 6,143,200 6,300,919 6,327,279
---------- ---------- ----------
Basic net income per common share....................... $ 0.23 $ 0.31 $ 0.56
========== ========== ==========
DILUTED NET INCOME PER COMMON SHARE
Net Income as reported.................................... $1,442,836 $1,929,766 $9,904,908
Preferential Distribution................................. - - 6,339,684
---------- ---------- ----------
Net Income Available to Common Stockholders............... 1,442,836 1,929,766 3,565,224
Weighted average number of common shares outstanding:
Common Stock............................................ 6,143,200 6,300,919 6,327,279
Effect of Stock options................................. 5,412 23,230 47,747
---------- ---------- ----------
Total................................................ 6,148,612 6,324,149 6,375,026
---------- ---------- ----------
Diluted net income per common share..................... $ 0.23 $ 0.31 $ 0.56
========== ========== ==========
</TABLE>
<PAGE>
Exhibit 21
Subsidiaries of Linkage Solutions, Inc.
---------------------------------------
Linkage, Inc., a Massachusetts corporation
Linkage International Limited, a private limited company formed under the laws
of England and Wales
High, Maley & Milhorn, Inc., a Texas corporation
<PAGE>
EXHIBIT 23.3
CONSENT OF WALLACE A. CATALDO
The undersigned hereby consents to his election as a director of Linkage
Solutions, Inc., following the closing of the company's proposed initial
public offering of its common stock, and consents to be named as a director
designee of the company in the prospectus related to such offering.
EXECUTED as of March 12, 1999.
/s/ Wallace A. Cataldo
-------------------------------------
Wallace A. Cataldo
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,843,155
<SECURITIES> 0
<RECEIVABLES> 1,635,107
<ALLOWANCES> 256,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,618,126
<PP&E> 330,652
<DEPRECIATION> 85,053
<TOTAL-ASSETS> 4,863,725
<CURRENT-LIABILITIES> 1,229,025
<BONDS> 0
0
0
<COMMON> 61,432
<OTHER-SE> 3,573,268
<TOTAL-LIABILITY-AND-EQUITY> 4,863,725
<SALES> 10,733,089
<TOTAL-REVENUES> 10,733,089
<CGS> 5,849,460
<TOTAL-COSTS> 9,166,802
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,635,836
<INCOME-TAX> 193,000
<INCOME-CONTINUING> 1,442,836
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,442,836
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,082,238
<SECURITIES> 0
<RECEIVABLES> 2,220,230
<ALLOWANCES> 312,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,854,548
<PP&E> 648,878
<DEPRECIATION> 181,768
<TOTAL-ASSETS> 7,321,658
<CURRENT-LIABILITIES> 1,742,794
<BONDS> 0
0
0
<COMMON> 63,129
<OTHER-SE> 5,515,738
<TOTAL-LIABILITY-AND-EQUITY> 7,321,658
<SALES> 17,549,621
<TOTAL-REVENUES> 17,549,621
<CGS> 9,840,552
<TOTAL-COSTS> 15,571,414
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,101,766
<INCOME-TAX> 172,000
<INCOME-CONTINUING> 1,929,766
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,929,766
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,393,310
<SECURITIES> 0
<RECEIVABLES> 5,308,931
<ALLOWANCES> 419,000
<INVENTORY> 0
<CURRENT-ASSETS> 10,354,176
<PP&E> 1,499,767
<DEPRECIATION> 442,820
<TOTAL-ASSETS> 12,044,524
<CURRENT-LIABILITIES> 3,525,294
<BONDS> 250,000
0
0
<COMMON> 63,341
<OTHER-SE> 8,205,889
<TOTAL-LIABILITY-AND-EQUITY> 12,044,524
<SALES> 24,274,118
<TOTAL-REVENUES> 24,274,118
<CGS> 13,168,879
<TOTAL-COSTS> 20,435,419
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,025,224
<INCOME-TAX> 460,000
<INCOME-CONTINUING> 3,565,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 6,339,684
<NET-INCOME> 9,904,908
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
</TABLE>
