<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
Commission File Number 0-16530
FINANCIAL PERFORMANCE CORPORATION
(Exact name of Registrant as specified in its charter)
New York 13-3236325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
335 Madison Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 557-0401
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 9, 1998
Common Stock 9,421,534 Shares
<PAGE> 2
Financial Performance Corporation
Report on Form 10-QSB for the Quarter ended September 30, 1998
TABLE OF CONTENTS
Part I. Page
----
Item 1. Financial Statements (Unaudited)..................................1
Consolidated Balance Sheets
September 30, 1998 and September 30,1997..............2
Consolidated Statements of Operations
For the Nine Months Ended
September 30, 1998 and September 30, 1997.............3
Consolidated Statements of Operations
For the Three Months Ended
September 30, 1998 and September 30, 1997.............4
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months Ended
September 30,1998 and September 30, 1997..............5
Consolidated Statements of Cash Flows
for the Nine Months Ended
September 30,1998 and September 30, 1997..............6
Notes to Consolidated Financial Statements....................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................16
Part II
Item 6. Exhibits and Reports on Form 8-K.................................24
-ii-
<PAGE> 3
PART I
Item 1. Financial Statements
The financial statements of Financial Performance Corporation (the
"Company") begin on page 2.
<PAGE> 4
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,456,266 $ 1,139,974
Accounts receivable 3,238,363 1,645,918
Prepaid expenses and other current assets 118,227 69,337
----------- -----------
Total current assets 6,812,856 2,855,229
Property and equipment, net of accumulated depreciation 193,690 172,242
Software development costs 135,605 574,720
Investment in subsidiary 610,942 --
Other assets 311,163 307,918
----------- -----------
$ 8,064,256 $ 3,910,109
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 3,040,288 $ 1,733,648
----------- -----------
Total current liabilities 3,040,288 1,733,648
----------- -----------
Minority interest in consolidated subsidiaries 888,046 423,046
----------- -----------
Stockholders' equity
Common stock - authorized 50,000,000 shares
of $.01 par value per share: issued and
outstanding 9,421,534 as of September 30, 1998
and 8,021,534 as of September 30, 1997 94,215 80,215
Additional paid in capital 7,746,761 7,480,761
Accumulated (deficit) (3,705,054) (5,807,561)
----------- -----------
Total stockholders' equity 4,135,922 1,753,415
----------- -----------
$ 8,064,256 $ 3,910,109
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
-2-
<PAGE> 5
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 16,273,508 $ 6,412,855
------------ ------------
Costs and expenses
Cost of revenues 12,222,532 5,402,086
Salaries and related expenses 380,730 534,263
Selling, general and administrative 853,743 1,073,758
------------ ------------
13,457,005 7,010,107
------------ ------------
Operating income (loss) 2,816,503 (597,252)
------------ ------------
Other income (expense):
Interest income 57,150 36,030
Minority interest in income of consolidated
subsidiaries (634,000) 13,400
------------ ------------
(576,850) 49,430
------------ ------------
Income (loss) before income taxes 2,239,653 (547,822)
Income taxes 147,850 13,620
------------ ------------
Net income (loss) $ 2,091,803 $ (561,442)
============ ============
Per share data:
Basic and diluted earnings (loss) per share $ .238 $ (.07)
============ ============
Average shares outstanding 8,799,309 7,992,382
============ ============
</TABLE>
See accompanying notes to the financial statements.
-3-
<PAGE> 6
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 7,066,252 $ 1,936,589
----------- -----------
Costs and expenses
Cost of revenues 5,498,127 1,657,524
Salaries and related expenses 44,223 363,079
Selling, general and administrative 345,795 553,550
----------- -----------
5,888,145 2,574,153
----------- -----------
Operating income (loss) 1,178,107 (637,564)
----------- -----------
Other income (expense):
Interest income 27,660 10,146
Minority interest in income of consolidated
subsidiaries (320,000) 93,000
----------- -----------
(292,340) 103,146
----------- -----------
Income (loss) before income taxes 885,767 (534,418)
Income taxes 62,427 (27,534)
----------- -----------
Net income (loss) $ 823,340 $ (506,884)
=========== ===========
Per share data:
Basic and diluted earnings (loss) per share $ .087 $ (.06)
=========== ===========
Average shares outstanding 9,421,532 8,015,532
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
-4-
<PAGE> 7
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid In
Shares Par Value Capital Deficit Total
--------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 8,021,534 $ 80,215 $ 7,480,761 $(5,796,857) $ 1,764,119
Issuance of shares in private
placement, net of costs 1,400,000 14,000 266,000 -- 280,000
Net income -- -- -- 2,091,803 2,091,803
--------- ----------- ----------- ----------- -----------
Balance, September 30, 1998 9,421,534 $ 94,215 $ 7,746,761 $(3,705,054) $ 4,135,922
========= =========== =========== =========== ===========
Balance, January 1, 1997 7,850,782 $ 78,508 $ 7,341,725 $(5,246,119) $ 2,174,114
Issuance of shares in private
placement, net of costs 170,752 1,707 139,036 -- 140,743
Net income (loss) -- -- -- (561,442) (561,442)
--------- ----------- ----------- ----------- -----------
Balance, September 30, 1997 8,021,534 $ 80,215 $ 7,480,761 $(5,807,561) $ 1,753,415
========= =========== =========== =========== ===========
</TABLE>
See accompanying notes to the financial statements.
-5-
<PAGE> 8
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,091,803 $ (561,442)
Adjustments to reconcile to net cash provided by (used in)
operating activities:
Depreciation and amortization 55,631 147,217
Minority interest in income of consolidated subsidiaries 634,000 (13,400)
Changes in operating assets and liabilities:
Accounts receivable (2,517,747) (548,360)
Prepaid expenses and other current assets (39,117) 92,360
Other assets (7,357) (147,662)
Accounts payable and accrued expenses 1,132,135 527,765
----------- -----------
Net cash provided by (used in) operating activities 1,349,348 (503,522)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (50,114) (122,591)
Software development costs -- (189,396)
Investment in subsidiary (379,186) --
----------- -----------
Net cash used in investing activities (429,300) (311,987)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of common shares and exercise of
warrants 280,000 140,743
Subsidiary company stock issued to minority shareholder -- 170,000
----------- -----------
Net cash provided by financing activities 280,000 310,743
----------- -----------
Net increase (decrease) in cash 1,200,048 (504,766)
Cash, beginning of period 2,256,218 1,644,740
----------- -----------
Cash, end of period $ 3,456,266 $ 1,139,974
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 24,000 $ 23,000
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
-6-
<PAGE> 9
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND BUSINESS
Financial Performance Corporation (the "Company") through its subsidiaries
currently markets merger communications services and computer software to the
financial services industry. The Company was incorporated in New York on August
14, 1984. The Company ceased operations from February 1990 through November
1992.
During the fiscal year ended September 30, 1995, the Company established
three eighty percent owned subsidiaries, Michaelson Kelbick Partners Inc.
("MKP"), FPC Information Corp. ("FPC Information") and Aspen Capital Management,
LLC ("Aspen").
MKP was formed and commenced operations in October 1994. MKP is engaged in
providing specialized merger communications and marketing services to the
financial services industry (see Note B (1)).
FPC Information was formed in November 1994 for the purpose of marketing
the Company's software products.
In October 1997, the Company's investment in FPC Information Corp. was
reduced from eighty percent to fifty percent, as a result of a $225,000
additional investment by the minority shareholder. The Company has the option to
repurchase a thirty percent equity interest in FPC Information Corp. exercisable
at any time prior to September 30, 1999 at the fair market value of such
interest, but in no event less than $225,000.
Aspen was formed in January 1995 as an international sponsor of cash
management funds and planned to engage in the development, investment management
and administration of such funds. Aspen, which was in the development stage,
ceased operations in September 1996.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Principles of Consolidation
The consolidated financial statements include the accounts of
Financial Performance Corporation and Subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Investments in FPC Information
Corp. in which the Company does not have control is accounted for by the equity
method.
Condensed financial information of its eighty percent owned
subsidiary, MKP, excluding intercompany eliminations, as of September 30, 1998
and 1997 and for the nine months then ended, is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash $ 3,243,000 $ 1,091,000
Accounts receivable 3,238,000 1,646,000
Other assets 180,000 47,000
Accounts payable 2,744,000 1,435,000
Revenues 16,274,000 6,412,000
Operating costs 13,982,000 5,893,000
Net income 2,201,000 542,000
</TABLE>
-7-
<PAGE> 10
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(1) Principles of Consolidation (continued)
Intercompany management fees of $1,013,000 and $267,000 were included
in operating costs for the nine months ended September 30, 1998 and 1997,
respectively. These amounts were eliminated upon consolidation.
Condensed financial information for the Company's other subsidiaries,
Aspen Capital Management, LLC and FPC Information Corp. for the nine months
ended September 30, 1998 and 1997, has not been separately disclosed. These
entities had no revenues and their assets and liabilities are immaterial.
(2) Revenue recognition
Revenue from software products is recognized upon delivery to the
customer, provided that no significant vendor obligations remain, and collection
of the resulting receivable is deemed probable.
(3) Software Development Costs and Amortization
Costs associated with software development subsequent to the
establishment of technological feasibility, including enhancements to software
products, are capitalized and amortized as required by Statement of Financial
Accounting Standards No. 86. Costs incurred prior to achieving technological
feasibility are expensed as incurred and classified as research and development
costs. There were no research and development costs incurred for the nine months
ended September 30, 1998 and 1997.
Amortization of capitalized software development costs is generally
provided on a product-by-product basis at the greater of the amount computed by
using the ratio that current gross revenue bears to the total current and
anticipated gross revenue of the product or on the straight-line method over the
sixty-month estimated useful life of the product commencing when the product is
available for general release to customers.
-8-
<PAGE> 11
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(4) Earning (loss) per common share
The consolidated financial statements are presented in accordance with
SFAS NO. 128, "Earnings Per Share." Basic earnings per common share are computed
using the weighted average number of common shares outstanding during the
period. Diluted earnings per common share incorporate the incremental shares
issuable upon the assumed exercise of stock options and warrants.
(5) Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
(6) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(7) Depreciation and amortization
Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets.
Amortization of an intangible asset, a customer list of $164,000,
included on the balance sheet under the caption, other assets, is being
amortized on the straight line basis, over ten years.
(8) Income Taxes
Income taxes are computed in accordance with the provisions of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
The income tax expense for the nine months ended September 30, 1998
and 1997 represents state and local income taxes on the income of MKP.
-9-
<PAGE> 12
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE C - SIGNIFICANT CUSTOMERS
For the nine months ended September 30, 1998 three customers of
the Company's subsidiary, MKP, accounted for 83% of the Company's consolidated
revenues in the following respective percentages:
Customer A 53%
Customer B 17%
Customer C 13%
---
83%
===
The total accounts receivable from these customers at September 30,
1998 amounted to 85% of the total accounts receivable balance.
NOTE D - WARRANTS TO PURCHASE COMMON STOCK
At September 30, 1998, the Company had outstanding warrants as follows:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Shares Price Date
- --------- -------- ----------
<S> <C> <C>
200,000 .50 September 15, 2010
725,000 1.00 September 15, 2006
250,000 .50 November 30, 1999
20,000 1.00 September 16, 2006
</TABLE>
NOTE E - INCENTIVE STOCK OPTION PLAN
In March 1988, the Company adopted a stock option plan. The plan provides
for the granting of options to purchase up to 140,000 shares of common stock to
key employees, officers and directors at an exercise price equal to fair market
value at the date of grant. The right to exercise options granted under the plan
commences one year from the date of the grant and such options are exercisable
in increments of 25% each year provided employment with the Company is
continuous.
Outstanding options granted pursuant to the stock option plan, as of
September 30, 1998, are as follows:
<TABLE>
<CAPTION>
Number of Exercise Exercisable at
Shares Price September 30, 1998
- --------- -------- ------------------
<S> <C> <C>
40,000 $ .4375 40,000
30,000 4.8125 30,000
</TABLE>
-10-
<PAGE> 13
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE F - EMPLOYEE BENEFIT PLANS
In September 1996, the Company established a non-contributory defined
contribution pension and profit sharing plan for the benefit of eligible
full-time employees. The plan provides for annual contributions to a trust fund,
which are based upon a percentage of qualifying employees' annual compensation.
Total contributions are limited to the maximum amount deductible for federal
income tax purposes.
The plan was terminated in March, 1997.
In January, 1997, the Company established a 401(k) salary deferred benefit
plan covering substantially all employees who have met certain requirements. The
plan requires Company contributions equal to 50% to a maximum of 3% of each
participant's contribution percentage.
In September, 1997, the Company amended its 401(k) plan to provide a
provision for discretionary profit sharing plan contributions.
NOTE G - COMMITMENTS
The Company has commitments under non-cancelable operating leases for
office space and equipment, which expire on October 31, 2006 and September 30,
2000, respectively. The office lease includes provisions requiring the Company
to pay a proportionate share of increases in real estate taxes and operating
expenses over base period amounts.
Minimum payments for the leased properties for subsequent years are as
follows:
<TABLE>
<CAPTION>
Years Ending
December 30,
------------
<S> <C>
1998 $ 281,000
1999 281,000
2000 281,000
2001 374,000
2002 415,000
Thereafter 1,711,000
-----------
$ 3,343,000
===========
</TABLE>
Rent and equipment leasing expense for the nine months ended September 30, 1998
and 1997 was $308,000 and $240,000 respectively.
-11-
<PAGE> 14
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE H - EMPLOYMENT AGREEMENTS
On September 1, 1995, the Company entered into a five year employment
agreement with Mr. Finley which expired on August 31, 2000. Under the agreement,
Mr. Finley's initial annual salary was $125,000, subject to increases as
determined by the Company's Board of Directors, and Mr. Finley's salary was
subsequently increased to $150,000.
Effective as of October 1, 1997, the Company entered into a new three year
employment agreement with Mr. Finley which expires on September 30, 2000. Under
this employment agreement, Mr. Finley's initial salary was $150,000 per annum,
subject to periodic increases as determined by the Company's Board of Directors.
In the event of the termination of Mr. Finley's employment by reason of a
"change in control" (as such term is defined in the employment agreement) of the
Company or certain other events, then in addition to paying Mr. Finley's salary
and accrued benefits through the date of termination of employment, the Company
shall be obligated to pay to Mr. Finley, as severance pay, an amount equal to
200% of Mr. Finley's annual base salary rate as of the effective date of
termination and to maintain through the remaining balance of the term of the
employment agreement (but not less than two years from the date of termination
of Mr. Finley's employment agreement) all employee benefit plans and programs in
which Mr. Finley was entitled to participate. The Company agreed to pay
reasonable travel and entertainment expenses incurred by Mr. Finley on behalf of
the Company and to provide Mr. Finley with a leased automobile. If Mr. Finley
does not elect not to renew his employment agreement at the expiration of the
term and the Company does not elect to renew Mr. Finley's employment upon the
expiration of the term thereof, then Mr. Finley was entitled to receive a
severance payment of $100,000.
Effective as of October 1, 1998, the Company amended its employment
agreement with Mr. Finley to increase Mr. Finley's annual salary from $150,000
to $250,000 and to increase Mr. Finley's severance payment in the event Mr.
Finley does not elect not to renew his employment agreement at the expiration of
the term thereof and the Company does not elect to renew Mr. Finley's employment
upon the expiration of the term thereof from $100,000 to $350,000. The $350,000
severance payment to Mr. Finley would also become due if Mr. Finley's employment
agreement is terminated by reason of the Company's breach thereof. If Mr. Finley
elects not to renew the employment agreement upon the expiration of the term
thereof, Mr. Finley will be entitled to a severance payment of $250,000. The
amended employment agreement with Mr. Finley also provides that (i) if the
Company elects not to renew the employment agreement with Mr. Finley upon the
expiration of the term thereof, (ii) Mr. Finley terminates the employment
agreement due to a "change in control" of the Company or MKP or (iii) the
Company terminates the employment agreement in breach of the terms thereof, then
in addition to the cash severance payments provided for, Mr. Finley will be
entitled to receive common stock of the Company, with "piggy-back" registration
rights, equal in value to the difference, if any, between the fair market value
of all stock and warrants of the Company then owned by Mr. Finley and
$1,000,000.00.
-12-
<PAGE> 15
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE H - EMPLOYMENT AGREEMENTS (continued)
In October, 1994, MKP entered into executive employment agreements with
each of Ms. Michaelson and Ms. Kelbick for a term of three years ending October
17, 1997. Under the terms of the agreements, the initial annual salary of Ms.
Michaelson and Ms. Kelbick was $80,000. The annual base salary payable to each
of Ms. Michaelson and Ms. Kelbick was subsequently increased to $115,000.
Effective as of September 11, 1997, MKP entered into a new three year employment
agreement with each of Ms. Michaelson and Ms. Kelbick which expires on September
10, 2000. Under these agreements, the initial annual base salary payable to each
of Ms. Michaelson and Ms. Kelbick was $150,000, subject to periodic increases as
determined by MKP's Board of Directors. The employment agreements further
provide for an annual incentive compensation payment for each of Ms. Michaelson
and Ms. Kelbick equal to a percentage not to exceed 30%, determined annually by
the Board of Directors, (such percentage initially established at 30%) of the
net income before taxes of MKP as if MKP was not a member of the Company's
consolidated group. Ms. Michaelson and Ms. Kelbick have the option to take all
or a portion of the bonus in the Company's securities.
Pursuant to the September 1997 executive employment agreements if either
Ms. Michaelson or Ms. Kelbick does not elect not to renew her respective
employment agreement with MKP at the expiration of the term and MKP elects not
to renew the employment agreement, the respective executive will be entitled to
receive a severance payment in the amount of $250,000. The employment agreements
provide each of Ms. Michaelson and Ms. Kelbick with a clothing expense allowance
of $10,000 for each year of the term of the agreement and a leased automobile
throughout the term.
In the event of the termination of employment of either Ms. Michaelson or
Ms. Kelbick by reason of a "change in control" (as such term is defined in the
employment agreement) of MKP or the Company, or certain other events, then in
addition to paying all salary and accrued benefits through the date of
termination of employment, MKP shall be obligated to pay to the employee, as
severance pay, an amount equal to 200% of the employee's annual base salary rate
in effect as of the date of termination and to maintain through the remaining
balance of the term of the employment agreement (but not less than two years
from the date of termination of the employee's employment agreement) all
employee benefit plans and programs in which the employee was entitled to
participate. The Company has issued 20 shares of MKP and 200,000 shares of the
Company, in the aggregate, to Ms. Michaelson and Ms. Kelbick.
Effective as of October 1, 1998, MKP entered into amendments of the
employment agreements with each of Ms. Michaelson and Ms. Kelbick. Pursuant to
the amendments, the annual base salary payable to each of Ms. Michaelson and Ms.
Kelbick was increased to $250,000 and the annual clothing allowance for each of
Ms. Michaelson and Ms. Kelbick was increased from $10,000 to $15,000.
Additionally, the severance payment required if either Ms. Michaelson or Ms.
Kelbick does not elect not to renew her respective employment agreement with MKP
at the expiration of the term and MKP elects not to renew the employment
agreement was increased from $250,000 to $350,000.
-13-
<PAGE> 16
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE H - EMPLOYMENT AGREEMENTS (continued)
The $350,000 severance payment would also become due to each of Ms. Michaelson
and Ms. Kelbick if the employment of such employee is terminated by reason of
MKP's breach of the employment agreement with such employee. Additionally, if
either Ms. Michaelson or Ms. Kelbick elects not to renew her respective
employment agreement with MKP at the expiration of the term, the respective
employee will be entitled to receive a severance payment of $250,000. If the
employment of either Ms. Michaelson or Ms. Kelbick shall be terminated for any
reason other than "for cause" by MKP, then the respective employee shall be
entitled to continued payment of the annual incentive compensation payment for a
period of six (6) months after termination based upon MKP's net income before
taxes for projects which were active on the date of termination.
NOTE I - RESTRICTED CASH AND CONTINGENCIES
At September 30, 1998, $180,000 was invested in a Certificate of Deposit
and is pledged as security for a letter of credit issued in connection with the
lease for office space (see Note G). The $180,000 Certificate of Deposit is
included on the balance sheet under the caption, other assets. This exceeds the
federally insured limit.
NOTE J - CONCENTRATION OF CREDIT RISK
The Company maintains its cash and cash equivalents with a major financial
institution. The balance at times may exceed federally insured limits. The
company performs periodic evaluations of the relative credit standing of this
financial institution and limits the amount of credit exposure.
-14-
<PAGE> 17
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE K - EARNINGS PER SHARE INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------------------------------------
1998 1997
---------------------------- -----------------------------
Basic Diluted Basic Diluted
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) available to
Common share owners $ 2,091,803 $ 2,091,803 $ (561,442) $ (561,442)
============ ============ ============ ============
Average shares outstanding 8,799,309 8,799,309 7,992,382 7,992,382
Dilutive securities
Stock options and warrants (1) -- 1,265,000 -- 2,072,649
------------ ------------ ------------ ------------
Average shares outstanding 8,799,309 10,064,309 7,992,382 10,065,031
============ ============ ============ ============
</TABLE>
(1) Excluded because exercise price exceeds market value.
NOTE L - CHANGE IN FISCAL YEAR
In February 1998, the Company's Board of Directors unanimously approved a
resolution to change the Company's fiscal year end from September 30 to December
31.
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<PAGE> 18
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
History. The Company was incorporated in New York in 1984 under the
name Performance Services Group, Inc. and at that time was primarily engaged in
offering banking institutions a range of proprietary sales and marketing
products, strategic planning and product consulting services and financial
software products. In July 1989, the Company's Common Stock was delisted from
the Nasdaq over-the-counter market and from February 1990 to November 1992 the
Company was inactive.
In January 1993, the Company recommenced its operations and raised
working capital through private debt and equity issuances, including issuances
to one of the Company's principal stockholders. In 1994, the Company began
implementing a business strategy of establishing subsidiary companies to engage
in related or complementary areas of the financial services industry. As a
result, the Company, together with other parties, formed three subsidiaries
(Michaelson Kelbick Partners Inc. ("MKP"), Aspen Capital Management, LLC
("Aspen") and FPC Information Corp. ("FPC Information")). MKP is engaged in
providing merger communications and marketing services to the financial services
industry. FPC Information was formed to market the Company's software and Aspen
was formed to operate as an international sponsor of cash management funds.
Although the Company generated revenues for each of the last four fiscal years
ended September 30, 1997, it incurred losses of $146,036, $801,296, $235,049 and
$544,848 for the fiscal years ended September 30, 1994, 1995, 1996 and 1997,
respectively.
Revenues. The Company's revenues historically have been derived from a
limited number of customers, due principally to the nature of the merger
communications business which has generally required concentration of the
Company's personnel and resources on a limited number of large projects from
different merger clients during any particular period. For the year ended
September 30, 1997, two customers accounted for approximately 72% for the
Company's revenues, with one customer accounting for approximately 56% of its
revenues. In view of the nature of the merger communications business as
aforesaid, the Company anticipates that a substantial amount of its revenues
will continue to be derived from a limited number of customers. As a result, the
Company's sales and operating results are subject to substantial variations in
any given year and from quarter to quarter. The Company's sales and net income
(if any) in a particular quarter may be lower than the sales and net income (if
any) of the Company for the comparable quarter in the prior year. In addition,
sales and net income (if any) of the Company in any particular quarter may not
necessarily reflect the results of operations for the Company for the full year.
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<PAGE> 19
Subsidiaries. The Company's consolidated financial statements include
the accounts of Financial Performance Corporation and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Summary financial information concerning MKP, excluding intercompany
eliminations, as of September 30, 1998 and 1997 and for the nine months then
ended, is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash ..................................... $ 3,243,000 $ 1,091,000
Accounts receivable ...................... $ 3,238,000 $ 1,646,000
Other assets ............................. $ 180,000 $ 47,000
Accounts payable ......................... $ 2,744,000 $ 1,435,000
Revenues ................................. $16,274,000 $ 6,412,000
Operating costs .......................... $13,982,000 $ 5,893,000
Net income ............................... $ 2,201,000 $ 542,000
</TABLE>
Summary financial information concerning the Company's other two
subsidiaries, Aspen and FPC Information, as of September 30, 1998 and 1997 and
for the nine months then ended, is not separately set forth as these entities
had no revenues for such periods and their assets and liabilities during such
periods were immaterial.
Aspen, whose operations commenced in March 1995, suspended its
operations in September 1996. Aspen was reported as a discontinued operation at
September 30, 1996.
Change in Fiscal Year. On February 23, 1998, the Company's Board of
Directors unanimously approved a resolution to change the Company's fiscal year
end from September 30 to December 31. A Transition Report on Form 10-QSB was
filed by the Company for the transition period commencing October 1, 1997
through December 31, 1997 pursuant to Rule 15d-10 of the Securities Exchange Act
of 1934.
Year 2000. The Company recognizes the potential business impact
relating to the Year 2000 computer system issue and is implementing a plan to
assess and improve the Company's state of readiness with respect to such issue.
The Year 2000 issue is one where computer systems may recognize the designation
"00" as 1900 when it means 2000, resulting in system failure or miscalculations.
-17-
<PAGE> 20
In recognition of the Year 2000 issue, commencing in 1998, the Company
initiated a comprehensive review of its information technology systems, which
the Company is dependent upon for the conduct of its business operations, as
well as the computer hardware and software products, components and other
equipment supplied to the Company by third parties in order to determine the
adequacy of those systems in light of the Company's future business
requirements. Year 2000 readiness is one of the factors being considered in the
review of the Company's systems. Such review includes testing and analysis of
the Company's systems and inquiries of third parties supplying information
technology systems, computer hardware and software products and components, and
other equipment to the Company in order to receive assurances from such third
parties that these systems, products and components are Year 2000 compliant. The
Company believes it will complete its review by January 1999.
As a result of its review to date, the Company has determined that its
internal financial software systems are adequate for the Company's future
business needs, including Year 2000 compliance, and do not need to be replaced.
Also, the Company has completed all necessary Year 2000 modifications with
regard to the MARS(TM) computer software product developed by the Company's
subsidiary, FPC Information Corp. The Company believes that the MARS(TM)
computer software product is Year 2000 compliant.
The Company has not developed a "worst case" scenario with respect to
Year 2000 issues, but instead has focused its resources on identifying any
material, remediable problems and reducing uncertainties generally, through the
review procedures described above.
At this time, the Company has not developed Year 2000 contingency
plans, other than the review described above, and does not intend to do so
unless the Company believes such plans are merited by the results of its
continuing Year 2000 review. The Company maintains and deploys contingency plans
designed to address various other potential business interruptions. These plans
may be applicable to address the possible interruption of support provided by
third parties resulting from their failure to be Year 2000 compliant.
If the Company or the third parties with which it has relationships
were to not successfully meet its or their Year 2000 compliance requirements,
the Company would likely encounter disruptions to its business that could have a
material adverse effect on its business, financial position and results of
operations. The Company could be materially and adversely impacted by widespread
economic or financial market disruption or by Year 2000 computer system failures
of third parties with which it has relationships.
Other. Income taxes are computed in accordance with the provisions of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the
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<PAGE> 21
difference between the financial statement carrying amounts and tax basis of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.
At September 30, 1997, the Company had net operating loss
carryforwards of approximately $1,150,000, which will expire in 2012. Certain
provisions of the tax law may limit the net operating loss carryforwards
available for use by the Company in the event of a significant change in the
ownership interest of the Company. At September 30, 1997, the Company had a
deferred tax asset of approximately $460,000. The deferred tax asset consisted
primarily of net operating loss carryforwards and was fully offset by a
valuation allowance of the same amount.
The income tax expense of $147,850 and $62,427 for the nine months and
three months ended September 30, 1998 and the income tax expense of $13,620 and
credit of ($27,534) for the nine months and three months ended September 30,
1997, respectively, represents state and local income taxes on the income of
MKP.
Costs associated with software development subsequent to the
establishment of technological feasibility, including enhancements to software
products, are capitalized and amortized as required by Statement of Financial
Accounting Standards No. 86. Costs incurred prior to achieving technological
feasibility are expensed as incurred and classified as research and development
costs. There were no research and development costs incurred by the Company for
the three months ended September 30, 1998 and 1997.
Amortization of capitalized software development costs is generally
provided on a product-by-product basis at the greater of the amount computed by
using the ratio of current gross revenue to total current and anticipated gross
revenue of the product or on the straight-line method over the sixty-month
estimated useful life of the product, commencing when the product is available
for general release to customers.
Forward-Looking Statements. Certain statements contained in this
Report on Form 10-QSB, including without limitation, statements containing the
words "believes," "anticipates," "may," "intends," "expects" and words of
similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company or
industry results to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which the Company operates;
competition; changes in business strategy or development plans; the development
or testing of the Company's software; technological, engineering, manufacturing,
quality control or other problems which could delay the sale of the Company's
software; the Company's ability to obtain appropriate licenses from third
parties, protect its trade secrets, operate without infringing upon the
proprietary rights of others and prevent others from infringing on the
proprietary rights of the Company; and the Company's ability to obtain
sufficient financing
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<PAGE> 22
to continue operations. Certain of these factors are discussed in more detail
elsewhere in this Report on Form 10-QSB.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998 vs. Three Months Ended September 30, 1997
Revenues. Total revenues increased by $5,129,663 or 264.9% to
$7,066,252 for the three months ended September 30, 1998 from $1,936,589 for the
three months ended September 30, 1997. This increase was attributable to an
increase in billings by MKP during this period. MKP generated 100% of the
consolidated revenues of the Company for the three months ended September 30,
1998 and for the three months ended September 30, 1997.
Cost of Revenues. Cost of revenues increased by $3,840,603 or 231.7%
to $5,498,127 for the three months ended September 30, 1998 from $1,657,524 for
the three months ended September 30, 1997. This increase was primarily
attributable to the increased level of business of MKP during this period as
well as the allocation of a larger percentage of payroll and overhead expenses
to cost of revenues. MKP realized an average profit margin of approximately
22.2% for the three months ended September 30, 1998 compared to an average
profit margin of approximately 14.4% for the three months ended September 30,
1997.
Salaries and Related Expenses. Payroll expenses decreased by $318,856
or 87.8% to $44,223 for the three months ended September 30, 1998 from $363,079
for the three months ended September 30, 1997. This decrease was attributable
principally to the allocation of a larger percentage of payroll expenses to cost
of revenues. Additionally, the decrease reflects the reduction in the Company's
ownership of FPC Information Corp. from 80% to 50% in October 1997 as well as a
reduction in the payroll expenses of FPC Information Corp.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $207,755 or 37.5% to $345,795 for the three
months ended September 30, 1998 from $553,550 for the three months ended
September 30, 1997. This decrease was attributable principally to the allocation
of a greater percentage of overhead expenses to cost of revenues. The Company
also believes that this decrease was reflective of the Company's control of its
overhead expenses notwithstanding the significantly increased level of business
of MKP during this period.
Other Income (Expense). Other expenses increased by $395,486 or 383.4%
to other expenses of $292,340 for the three months ended September 30, 1998 from
other income of $103,146 for the three months ended September 30, 1997. This
increase was attributable principally to an increase in the deduction
attributable to the Company's minority interest in income of consolidated
subsidiaries.
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<PAGE> 23
Operating Profit. The Company had an operating profit of $1,178,107
for the three months ended September 30, 1998 compared to operating loss of
$637,564 for the three months ended September 30, 1997.
Net Income. The Company had net income of $823,340 for the three
months ended September 30, 1998 compared to a net loss of $506,884 for the three
months ended September 30, 1997.
Nine Months Ended September 30, 1998 vs. Nine Months Ended September 30, 1997
Revenues. Total revenues increased by $9,860,653 or 153.8% to
$16,273,508 for the nine months ended September 30, 1998 from $6,412,855 for the
nine months ended September 30, 1997. This increase was attributable to an
increase in billings by MKP during this period. MKP generated 100% of the
consolidated revenues of the Company for the nine months ended September 30,
1998 and for the nine months ended September 30, 1997.
Cost of Revenues. Cost of revenues increased by $6,820,446 or 126.3%
to $12,222,532 for the nine months ended September 30, 1998 from $5,402,086 for
the nine months ended September 30, 1997. This increase was primarily
attributable to the increased level of business of MKP during this period as
well as the allocation of a larger percentage of payroll and overhead expenses
to cost of revenues. MKP realized an average profit margin of approximately
24.9% for the nine months ended September 30, 1998 compared to an average profit
margin of approximately 15.8% for the nine months ended September 30, 1997.
Salaries and Related Expenses. Payroll expenses decreased by $153,533
or 28.7% to $380,730 for the nine months ended September 30, 1998 from $534,263
for the nine months ended September 30, 1997. This decrease was attributable
principally to the allocation of a larger percentage of payroll expenses to cost
of revenues. Additionally, the decrease reflects the reduction in the Company's
ownership of FPC Information Corp. from 80% to 50% in October 1997 as well as a
reduction in the payroll expenses of FPC Information Corp.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by $220,015 or 20.5% to $853,743 for the nine
months ended September 30, 1998 from $1,073,758 for the nine months ended
September 30, 1997. This decrease was attributable principally to the allocation
of a greater percentage of overhead expenses to cost of revenues. The Company
also believes that this decrease is reflective of the Company's control of its
overhead expenses notwithstanding the significantly increased level of MKP's
business during this period.
Other Income (Expense). Other expenses increased by $626,280 or
1,267.0% to other expenses of $576,850 for the nine months ended September 30,
1998 from other income of $49,430 for the nine months ended September 30, 1997.
This increase was attributable principally
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<PAGE> 24
to an increase in the deduction attributable to the Company's minority interest
in income of consolidated subsidiaries.
Operating Profit (Loss). The Company had an operating profit of
$2,816,503 for the nine months ended September 30, 1998 compared to an operating
loss of $597,252 for the nine months ended September 30, 1997.
Net Income (Loss). The Company had net income of $2,091,803 for the
nine months ended September 30, 1998 compared to a net loss of $561,442 for the
nine months ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
In the past, the Company required continuous capital to fund its
operating losses which were primarily attributable to expenses in connection
with marketing activities, research and development costs and other expenses
including salaries and related expenses and selling, general and administrative
expenses. The Company has financed its operations to date primarily through
public and private sales of its debt and equity securities, including
significant sales to one of its principal stockholders, and more recently
revenues generated by the Company's subsidiary, MKP. In addition, in October
1997, the Company sold an additional 30% equity interest in FPC Information to a
principal shareholder for a purchase price of $225,000.
As of September 30, 1998, the Company had working capital of
$3,772,568, stockholders' equity of $4,135,922 and a working capital ratio
(current assets to current liabilities) of approximately 2.2:1. As of September
30, 1998 and September 30, 1997, the Company had cash and cash equivalents of
$3,456,266 and $1,139,974, respectively.
For the nine months ended September 30, 1998, net cash provided by the
Company's operating activities was $1,349,348 compared to net cash used in
operating activities of $503,522 for the nine months ended September 30, 1997.
For the nine months ended September 30, 1998 and September 30, 1997, the Company
utilized $429,300 and $311,987 for investing activities. Net cash provided by
the Company's financing activities for the nine months ended September 30, 1998
and September 30, 1997 were $280,000 and $310,743, respectively.
Based on the Company's current plan of operations, it is anticipated
that the Company's existing working capital and expected operating revenues will
provide sufficient working capital for operations through December 31, 1999.
However, there can be no assurance that the Company will not require additional
financing prior to that time. For the years ending December 31, 1998, 1999, 2000
and 2001, the Company's minimum payments in connection with the leases will be
approximately $281,000, $281,000, $281,000 and $374,000 per year, respectively.
The Company anticipates that it may require additional capital to fund its
operations. The Company's capital requirements depend on, among other things,
whether the Company is successful in generating revenues and income from its
marketing efforts, the progress and costs of the Company's research and
development programs, the ability of the Company to successfully
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<PAGE> 25
market its services and software and the effect of such efforts on the Company's
operations, competing technological and market developments, the costs involved
in protecting and enforcing its proprietary rights and any litigation related
thereto and the cost and availability of third-party financing.
The Company may also seek additional financing in connection with the
acquisition of one or more products (or rights related thereto) or entities or
the consummation of other business combinations. Although the Company has
engaged in discussions with third parties from time to time concerning potential
acquisitions and other business combinations and anticipates continuing such
activities in the future, the Company has no current commitments regarding such
acquisitions or other business combinations.
Financing may be raised by the Company through additional equity
offerings, joint ventures or other collaborative relationships, borrowings and
other transactions. The Company may seek additional funding through any such
transaction or a combination thereof. There can be no assurance that additional
financing will be available to the Company or, if available, that such financing
will be available on acceptable terms.
PART II
Item 5. Other Information
Effective as of October 1, 1998, the Company amended its employment agreement
with Mr. Finley to increase Mr. Finley's annual salary from $150,000 to $250,000
and to increase Mr. Finley's severance payment in the event Mr. Finley does not
elect not to renew his employment agreement at the expiration of the term
thereof and the Company does not elect to renew Mr. Finley's employment upon the
expiration of the term thereof from $100,000 to $350,000. The $350,000 severance
payment to Mr. Finley would also become due if Mr. Finley's employment agreement
is terminated by reason of the Company's breach thereof. If Mr. Finley elects
not to renew the employment agreement upon the expiration of the term thereof,
Mr. Finley will be entitled to a severance payment of $250,000. The amended
employment agreement also provides that (i) if the Company elects not to renew
the employment agreement with Mr. Finley upon the expiration of the term
thereof, (ii) Mr. Finley terminates the employment agreement due to a "change in
control" of the Company or MKP or (iii) the Company terminates the employment
agreement with Mr. Finley in breach of the terms thereof, then in addition to
the cash severance payments provided for, Mr. Finley will be entitled to receive
common stock of the Company, with "piggy-back" registration rights, equal in
value to the difference, if any, between the fair market value of all stock and
warrants of the Company then owned by Mr. Finley and $1,000,000.00.
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<PAGE> 26
Effective as of October 1, 1998, MKP entered into amendments of the employment
agreements with each of Ms. Michaelson and Ms. Kelbick. Pursuant to the
amendments, the annual base salary payable to each of Ms. Michaelson and Ms.
Kelbick was increased to $250,000 and the annual clothing allowance for each of
Ms. Michaelson and Ms. Kelbick was increased from $10,000 to $15,000.
Additionally, the severance payment required if either Ms. Michaelson or Ms.
Kelbick does not elect not to renew her respective employment agreement with MKP
at the expiration of the term and MKP elects not to renew the employment
agreement was increased from $250,000 to $350,000. The $350,000 severance
payment would also become due to each of Ms. Michaelson and Ms. Kelbick if the
employment of such employee is terminated by reason of MKP's breach of the
employment agreement with such employee. Additionally, if either Ms. Michaelson
or Ms. Kelbick elects not to renew her respective employment agreement with MKP
at the expiration of the term, the respective employee will be entitled to
receive a severance payment of $250,000. If the employment of either Ms.
Michaelson or Ms. Kelbick shall be terminated for any reason other than "for
cause" by MKP, then the respective employee shall be entitled to continued
payment of the annual incentive compensation payment for a period of six (6)
months after termination based upon MKP's net income before taxes for projects
which were active on the date of termination.
Effective as of October 1, 1998, the Shareholders Agreement by and among the
Company, MKP, Susan Michaelson and Hillary Kelbick was amended to provide, among
other things, that in the event of the termination of the employment of either
Ms. Michaelson or Ms. Kelbick for any reason, the respective employee has the
right to require MKP to purchase all of the shares of stock of MKP owned by such
employee for an amount equal to the "cash value" of such stock (i.e., the amount
of cash and cash equivalents less accounts payable and other short term
liabilities, all as reflected on MKP's then current balance sheet, multiplied by
the percentage equity ownership in MKP represented by the stock of MKP owned by
such employee). If this right is not exercised by the employee, then MKP will
have the option to purchase such employee's stock in MKP at the "fair market
value" thereof as provided in the original Shareholders Agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.77. First Amendment to Executive Employment Agreement by
and among the Company, FPC Information Corp. and
William F. Finley dated as of October 1, 1998.
10.78. First Amendment to Managing Director's Agreement
between MKP and Susan Michaelson dated as of October
1, 1998.
10.79. First Amendment to Managing Director's Agreement
between MKP and Hillary Kelbick dated as of October
1, 1998.
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<PAGE> 27
10.80. Restated and Amended Shareholders Agreement dated as
of October 18, 1994 by and among MKP, Susan
Michaelson, Hillary Kelbick and the Company,
effective as of October 1, 1998.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
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<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 11, 1998
FINANCIAL PERFORMANCE CORPORATION
By: /s/ William F. Finley
----------------------------------------
William F. Finley
Chief Executive Officer and
President
(Principal Executive Officer and
Principal Financial and Accounting
Officer and Officer Duly Authorized
to Sign on Behalf of Registrant)
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<PAGE> 29
EXHIBIT INDEX
-------------
Exhibit
No. Description
------- -----------
10.77. First Amendment to Executive Employment Agreement by
and among the Company, FPC Information Corp. and
William F. Finley dated as of October 1, 1998.
10.78. First Amendment to Managing Director's Agreement
between MKP and Susan Michaelson dated as of October
1, 1998.
10.79. First Amendment to Managing Director's Agreement
between MKP and Hillary Kelbick dated as of October
1, 1998.
10.80. Restated and Amended Shareholders Agreement dated as
of October 18, 1994 by and among MKP, Susan
Michaelson, Hillary Kelbick and the Company,
effective as of October 1, 1998.
27 Financial Data Schedule
<PAGE> 1
Exhibit 10.77
FIRST AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
Agreement made as of October 1, 1998, by and between Financial Performance
Corporation, a New York corporation with offices at 335 Madison Avenue, 8th
Floor, New York, New York 10017("FPC"), FPC Information Corp., a New York
corporation with offices at 335 Madison Avenue, 8th Floor, New York, New York
("FPC Information Corp.") and William F. Finley, residing at 684 Hill Farm Road,
Fairfield, Connecticut 06430 ("Finley"). FPC and FPC Information Corp. are
hereinafter jointly and severally referred to as the "Corporation".
W I T N E S S E T H:
Whereas, the parties hereto entered into a executive employment agreement dated
as of September 11, 1997 (the "Executive Employment Agreement"); and
Whereas, the parties hereto desire to amend and/or supplement the Executive
Employment Agreement as herein set forth.
Now, therefore, in consideration of the premises, the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Section 2 of the Executive Employment Agreement is hereby amended and
restated in its entirety to read as follows:
"Term.
(a) The term of this agreement is three (3) years, commencing on
October 1, 1997 and ending on September 30, 2000 (the "Initial Term"), unless
earlier terminated by the Corporation or by Finley in accordance with the
provisions hereof. This agreement shall be automatically renewed for periods of
one (1) year each (the "Renewal Term") unless either party shall give the other
notice of his or its desire to terminate this agreement no later than on the
June 1st immediately preceding the expiration of the then current term, in which
event Finley's employment shall terminate at the end of the Initial Term or the
applicable Renewal Term, as the case may be. The Initial Term and the Renewal
Term are hereinafter collectively referred to as the Term.
(b) If Finley has not given notice to the Corporation on or before
June 1, 2000 that he elects not to renew this agreement at the expiration of the
Term and the Corporation gives notice to Finley that it elects not to renew this
agreement at the expiration of the Term, then and only in such event, provided
that Finley's employment is not properly terminated by the Corporation for cause
pursuant to and in accordance with the provisions of Section 7 below, in
addition to and without limitation of any other compensation, severance payments
or employment benefits which may be or become due from the Corporation to Finley
pursuant to this agreement, (but not in addition to any severance payment which
may be due pursuant to the provisions of subparagraph (c) of this Section 2, it
being understood that such severance payment and the severance payment payable
pursuant to this subparagraph (b) are mutually exclusive), (i) the Corporation
shall pay to
<PAGE> 2
Finley within ten (10) days following the expiration of the Term, a severance
payment in the amount of Three Hundred Fifty Thousand ($350,000.00) Dollars and
(ii) the Corporation shall issue to Finley within ten (10) days following the
expiration of the Term, the Termination Stock (hereinafter defined) as set forth
in Section 8(d) below.
(c) If Finley elects not to renew this Agreement at the expiration
of the Term and Finley's employment is not properly terminated by the
Corporation for cause pursuant to and in accordance with the provisions of
Section 7 below, then and only in such event, in addition to and without
limitation of any other compensation, severance payments or employment benefits
which may be or become due from the Corporation to Finley pursuant to this
agreement (but not in addition to any severance payment which may be due
pursuant to the provisions of subparagraph (b) of this Section 2, it being
understood that such severance payment and the severance payment payable
pursuant to this subparagraph (c) are mutually exclusive), the Corporation shall
pay to Finley, within ten (10) days following the expiration of the Term, a
severance payment in the amount of Two Hundred Fifty Thousand ($250,000.00)
Dollars.
(d) For purposes of this agreement, the term "employment benefits"
shall be deemed to include Finley's Annual Bonus (as such term is hereinafter
defined).
2. Section 5 of the Executive Employment Agreement is hereby amended
and restated in its entirety to read as follows:
"5. Compensation. For all services rendered by Finley pursuant to
this agreement, the Corporation shall pay Finley an annual salary twice monthly
on the 15th and 30th of each month, in arrears, as follows: (i) One Hundred
Fifty Thousand ($150,000.00) Dollars per annum during the period commencing on
October 1, 1997 through September 30, 1998; and (ii) Two Hundred Fifty Thousand
($250,000.00) Dollars during the period commencing on October 1, 1998 through
the balance of the Term. Such salary shall be subject to periodic increases as
shall be determined by the Board of Directors of the Corporation."
3. Section 6 of the Executive Employment Agreement is hereby re-titled
"Employment Benefits".
4. Section 7 of the Executive Employment Agreement is hereby restated
and amended in its entirety to read as follows:
"7. Termination.
(a) The Corporation may, at its election in accordance with the
procedures more particularly set forth below, terminate this agreement for
cause. For purposes of this agreement, "cause" shall be defined as and limited
to the following: (i) a material breach by Finley of any material term of this
agreement that has not been cured within thirty (30) days of receipt by Finley
of written notice of such breach and which causes substantial damage to the
reputation, business or property of the Corporation, any of the Corporation's
affiliates or any of the Corporation's (or any affiliate's) customers; (ii) a
continued failure of Finley after thirty (30) days notice of a prior failure to
devote Finley's full active business time (as more particularly described in
Section 4 above) to the performance of Finley's duties hereunder; (iii) an act
of willful misconduct in the performance of Finley's duties hereunder which
causes substantial damage to the reputation, business or property of the
Corporation, any of the Corporation's affiliates or any of the Corporation's
customers including, without limitation, any oral or written
<PAGE> 3
material misrepresentation relating to the Corporation (or any affiliate) or any
of its (or any affiliate's) customers which causes substantial damage to the
reputation of the Corporation (or any affiliate); (iv) conviction of a felony;
and (v) substantial, continuing and willful improper performance or
non-performance of any of Finley's material duties hereunder after thirty (30)
days written notice to cure as aforesaid. For purposes of this subsection (a),
no act, or failure to act, on Finley's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith or without reasonable
belief that his action or omission was in the best interests of the Corporation.
Notwithstanding the foregoing, Finley shall not be deemed to have been
terminated for cause without (i) thirty (30) days' notice to Finley setting
forth the reasons for the Corporation's intention to terminate for cause as set
forth above in this subsection (a), (ii) an opportunity for Finley, together
with his counsel, to be heard before the Corporation's board of directors, and
(iii) delivery to Finley of a Notice of Termination as defined in subsection (d)
below from an executive officer of the Corporation finding that, in the good
faith opinion of the Board of Directors of FPC, Finley was guilty of conduct set
forth or described above in justifying the Corporation's termination of Finley's
employment for cause and specifying the particulars thereof in detail.
(b) Finley may terminate his employment under this agreement for
Good Reason (as hereinafter defined). For purposes of this agreement, "Good
Reason" shall mean (i) a Change in Control (as defined below) of FPC or of FPC's
subsidiary, Michaelson Kelbick Partners Inc. ("MKP") which shall have been in
effect for a period of at least ninety (90) consecutive days; provided, however,
that Finley shall be unable to work harmoniously and effectively with the
personnel constituting the new management of FPC resulting from such Change of
Control (if any), (ii) a failure by the Corporation to comply with any material
provision of this agreement, which noncompliance shall have a material adverse
effect upon Finley and which shall not have been cured within thirty (30) days
after notice of such noncompliance has been given by Finley to the Corporation
pursuant to this agreement, (iii) if Finley's management functions, duties or
responsibilities or any other material aspect of Finley's employment shall have
been materially and adversely changed by the Corporation for a period in excess
of thirty (30) consecutive days notwithstanding Finley's written objection
thereto, (iv) if Finley shall cease to be chairman of the board of directors and
the chief executive officer of FPC (other than by reason of death, incapacity or
resignation) or (v) any purported termination of Finley's employment which is
not properly effected pursuant to a Notice of Termination satisfying the
requirements of subsection (d) below (and for purposes of this agreement no such
purported termination shall be effective).
(c) For the purpose of this agreement, a "Change of Control" shall
be deemed to have taken place if: (i) a third person, including a "group" as
such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
becomes (other than as a result of a purchase from FPC) the beneficial owner of
shares of FPC having more than thirty (30%) percent of the total number of votes
that may be cast for the election of directors of FPC and such beneficial
ownership continues for thirty (30) consecutive days, or (ii) as a result of, or
in connection with, any cash tender or exchange offer, merger or other business
combination of the foregoing transactions relating to FPC (hereinafter referred
to as a "Transaction") the persons who were directors of FPC before the
Transaction shall cease for any reason to constitute at least a majority of the
Board of Directors of FPC, or any successor(s) of FPC.
(d) Any termination of Finley's employment by the Corporation or by
Finley (other than termination by reason of Finley's death or disability as set
forth in Section 14 below) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
<PAGE> 4
termination provision in this agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Finley's employment under the provision so indicated.
(e) "Date of Termination" shall mean (i) if Finley's employment is
terminated by his death, the date of his death, (ii) if Finley's employment is
terminated pursuant to subsection (c) above, the date specified in the Notice of
Termination, and (iii) if Finley's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided that if
within thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected)."
5. Section 8 of the Executive Employment Agreement is hereby restated
and amended in its entirety to read as follows:
"8. Compensation Upon Termination or During Disability.
(a) During any period that Finley fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), Finley shall continue to receive his full salary at the
rate then in effect for such period and all employment benefits due to Finley
until his employment is terminated pursuant to Section 7 above, provided that
payments so made to Finley during the disability period shall be reduced by the
sum of the amounts, if any, payable to Finley at or prior to the time of any
such payment under disability benefit plans of the Corporation and which were
not previously applied to reduce any such payment.
(b) If Finley's employment is terminated by his death, the
Corporation shall pay to Finley's spouse, or if he leaves no spouse, to his
estate, within thirty (30) days of Finley's death, all salary and employment
benefits due to Finley accrued through the date of his death.
(c) If Finley's employment shall be properly terminated for cause
pursuant to all of the applicable provisions of this agreement, the Corporation
shall pay Finley his full salary only through the Date of Termination at the
rate in effect at the time Notice of Termination is given and the Corporation
shall have no further obligations to Finley under or pursuant to this Agreement.
(d) If (i) in breach of this agreement, the Corporation shall
terminate Finley's employment other than pursuant to subsection 7 (a) above
(termination for cause) or Section 14 below (termination by reason of death or
disability)(it being understood that a purported termination by the Corporation
pursuant to subsection 7 (a) above or Section 14 below which is disputed and
finally determined not to have been proper shall be deemed a termination by the
Corporation in breach of this agreement) or (ii) Finley shall terminate his
employment for Good Reason, then
(I) the Corporation shall pay Finley his full salary and all
employment benefits due to Finley through the Date of Termination at the rate in
effect at the time the Notice of Termination is given;
<PAGE> 5
(II) in lieu of any further salary payments to Finley for
periods subsequent to the Date of Termination, the Corporation shall pay to
Finley, as severance pay (and not as a penalty to the Corporation), an amount
equal to the product of (A) Finley's annual base salary rate in effect as of the
Date of Termination, multiplied by (B) the number two (2), such payment to be
made (X) if resulting from a termination based on a Change of Control of the
Corporation or of MKP, in a lump sum on or before the thirtieth (30th) day
following the Date of Termination, or (Y) if resulting from any other cause, in
substantially equal semimonthly installments on the fifteenth and last days of
each month commencing with the month in which the Date of Termination occurs and
continuing for forty-eight (48) consecutive semimonthly payment dates (including
the first such date as aforesaid), without interest;
(III) in addition to all other salary, employment benefits and
other payments due to Finley pursuant to the provisions of this subsection 8(d),
the Corporation shall issue to Finley, within ten (10) days after the Date of
Termination, such number of shares of the Corporation's common stock (such
shares of common stock are hereinafter referred to as the "Termination Stock")
as shall have an aggregate fair market value as of the Date of Termination equal
to one million ($1,000,000.00) dollars less the aggregate fair market value of
all of the shares of the Corporation's common stock and all of the warrants,
options and other derivative securities to purchase shares of the Corporation's
common stock which are owned of record by Finley on the Date of Termination. For
purposes of this clause (III), (x) the fair market value of each share of the
Corporation's common stock as of the Date of Termination shall be the average of
the bid and ask prices for the Corporation's common stock for the ten (10)
trading days immediately preceding the Date of Termination and (y) the fair
market value of each warrant, option or other derivative security to purchase
one (1) share of the Corporation's common stock as of the Date of Termination
shall be equal to the fair market value of one (1) share of the Company's common
stock as of the Date of Termination less the per share exercise price of such
warrant, option or other derivative security (but in no event shall such fair
market value of any warrant, option or other derivative security be less than
zero). If the Corporation's common stock shall not be publicly traded on the
Date of Termination, then the fair market value of the Corporation's common
stock shall be mutually determined by two investment banking firms with
experience related to the business of the Corporation and its subsidiaries. In
such event, one such firm shall be designated by Finley and the other firm shall
be designated by the Corporation. The fair market value of the Corporation's
common stock and the fair market value of the warrants, options and other
derivative securities to purchase shares of the Corporation's common stock as
determined pursuant to this clause (III) of this subsection 8(d) shall be final,
conclusive and binding upon the parties hereto. The Corporation shall be
obligated to register the Termination Stock, at the Corporation's sole cost and
expense, pursuant to a registration statement filed within sixty (60) days after
the Date of Termination and declared effective as soon thereafter as is
reasonably practicable. Further, if from and after the Date of Termination, the
shares of the Corporation's common stock underlying the warrants, options and
other derivative securities owned of record by Finley on the Date of Termination
(such underlying shares of common stock hereinafter referred to as "Underlying
Shares") shall not be freely tradeable by Finley pursuant to an effective
registration statement, then the Corporation shall also be obligated to register
all of the Underlying Shares together with the Termination Stock, at the
Corporation's sole cost and expense, pursuant to the aforementioned registration
statement. The Corporation shall be obligated to use its best efforts to cause
such registration statement to be declared effective as soon as possible after
filing and to maintain such effectiveness until all of the Termination Stock and
all of the Underlying Shares shall have been sold by Finley; and
<PAGE> 6
(IV) in addition to the payments referred to in clauses (I),
(II) and (III) above, if termination of Finley's employment arises out of a
breach by the Corporation of this agreement, the Corporation shall pay all other
damages to which Finley may be entitled as a result of such breach, including
damages for any and all loss of benefits to Finley under the Corporation's
employee benefit plans which Finley would have received if the Corporation had
not breached this agreement and had Finley's employment continued for the full
term provided in Section 2 hereof.
In addition to the occurrences specified in clauses (i) and (ii) of the preamble
to this subsection 8(d), the Termination Stock shall also be issued to Finley as
provided in subsection 2(b) above.
(e) Unless Finley's employment is properly terminated by the
Corporation for cause, the Corporation shall maintain in full force and effect,
for the continued benefit of Finley for the greater of the number of years
(including partial years) remaining in the term of employment hereunder or the
number two (2), all employee benefit plans and programs in which Finley was
entitled to participate immediately prior to the Date of Termination, provided
that Finley continued participation is possible under the general terms and
provisions of such plans and programs. In the event that Finley's participation
in any such plan or program is barred, the Corporation shall arrange to provide
Finley with benefits substantially similar to those which Finley would otherwise
have been entitled to receive under such plans and programs from which his
continued participation is barred.
(f) The Corporation may withhold from any payments or other benefits
payable to Finley pursuant to this Section 8 or any other provision of this
agreement all federal, state, city or other taxes as shall be required pursuant
to any law, government regulation or ruling."
6. Section 14 of the Executive Employment Agreement is hereby amended
by the addition of the following words at the end thereof: "except as otherwise
specifically set forth in Section 8 above".
7. The following provisions are hereby added as Section 23 of the
Executive Employment Agreement:
"Restated Agreement. This agreement has been restated and amended
effective as of October 1, 1998 to incorporate the provisions of the First
Amendment to the Executive Employment Agreement dated as of October 1, 1998 by
and between the Corporation and Finley."
8. Any capitalized term not specifically defined herein shall have the
meaning ascribed to such term in the Executive Employment Agreement.
9. Except as otherwise set forth in this agreement, all of the terms
and provisions of the Executive Employment Agreement, shall remain unmodified
and in full force and effect.
10. The covenants, agreements, terms, provisions and conditions
contained in this agreement shall bind and inure to the benefit of the parties
hereto and their respective heirs, successors, legal representatives and
permitted assigns, if any.
<PAGE> 7
11. This agreement may not be modified orally, but only by an agreement
in writing signed by the party against whom enforcement or any waiver, change,
modification or discharge is sought.
12. In the event of any inconsistency between the terms and provisions
of this agreement and the terms and provisions of the Shareholders Agreement,
the terms and provisions of this agreement shall govern and be binding.
In witness whereof, the parties hereto have executed this agreement as of the
day and year first above written.
WITNESS:
Financial Performance Corporation
By: /s/ Richard Levy
- ------------------------------- -------------------------------
Richard Levy, Secretary
FPC Information Corp.
By: /s/ Richard Levy
- ------------------------------- -------------------------------
Richard Levy, Secretary
/s/ William F. Finley
- ------------------------------- -------------------------------
William F. Finley, individually
<PAGE> 1
EXHIBIT 10.78
FIRST AMENDMENT TO MANAGING DIRECTOR'S AGREEMENT
Agreement made as of October 1, 1998, by and between Michaelson Kelbick Partners
Inc., a New York corporation with offices at 335 Madison Avenue, 8th Floor, New
York, New York 10017(the "Corporation"), and Susan Michaelson, residing at 684
Hill Farm Road, Fairfield, Connecticut 06430 ("Susan").
W I T N E S S E T H:
Whereas, the parties hereto entered into a managing director's agreement dated
as of September 11, 1997 (the "Managing Director's Agreement"); and
Whereas, the parties hereto desire to amend and/or supplement the Managing
Director's Agreement as herein set forth.
Now, therefore, in consideration of the premises, the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Section 2 of the Managing Director's Agreement is hereby amended and
restated in its entirety to read as follows:
"Term.
(a) The Term of this agreement is three (3) years, commencing on
September 11, 1997 and ending on September 10, 2000, unless earlier terminated
by the Corporation or by Susan in accordance with the provisions hereof. This
agreement shall be automatically renewed for periods of one (1) year each (the
"Renewal Term") unless either party shall give the other notice of her or its
desire to terminate this agreement no later than on the June 1st immediately
preceding the expiration of the then current term, in which event Susan's
employment shall terminate at the end of the Term or the applicable Renewal
Term, as the case may be. The Term and the Renewal Term are hereinafter
collectively referred to as the Term.
(b) If Susan has not given notice to the Corporation on or before
June 1, 2000 that she elects not to renew this agreement at the expiration of
the Term and the Corporation gives notice to Susan that it elects not to renew
this agreement at the expiration of the Term, then and only in such event,
provided that Susan's employment is not properly terminated by the Corporation
for cause pursuant to and in accordance with the provisions of Section 7 below,
in addition to and without limitation of any other compensation, severance
payments or employment benefits which may be or become due from the Corporation
to Susan pursuant to this agreement (but not in addition to any severance
payment which may be due pursuant to the provisions of subparagraph (c) of this
Section 2, it being understood that such severance payment and the severance
payment payable pursuant to this subparagraph (b) are mutually exclusive), the
Corporation shall pay to Susan, within ten (10) days following the expiration of
the Term, a severance payment in the amount of Three Hundred Fifty Thousand
($350,000.00) Dollars.
<PAGE> 2
(c) If Susan elects not to renew this Agreement at the expiration of
the Term and Susan's employment is not properly terminated by the Corporation
for cause pursuant to and in accordance with the provisions of Section 7 below,
then and only in such event, in addition to and without limitation of any other
compensation, severance payments or employment benefits which may be or become
due from the Corporation to Susan pursuant to this agreement (but not in
addition to any severance payment which may be due pursuant to the provisions of
subparagraph (b) of this Section 2, it being understood that such severance
payment and the severance payment payable pursuant to this subparagraph (c) are
mutually exclusive), the Corporation shall pay to Susan, within ten (10) days
following the expiration of the Term, a severance payment in the amount of Two
Hundred Fifty Thousand ($250,000.00) Dollars.
(d) For purposes of this agreement, the term "employment benefits"
shall be deemed to include Susan's Annual Bonus (as such term is hereinafter
defined)."
2. Subparagraph (a) of Section 5 of the Managing Director's Agreement
is hereby amended and restated in its entirety to read as follows:
"(a) For all services rendered by Susan pursuant to this agreement,
the Corporation shall pay Susan an annual salary payable bi-weekly, in arrears,
as follows: (i) One Hundred Fifty Thousand ($150,000.00) Dollars per annum
during the period commencing on September 11, 1997 through September 30, 1998;
and (ii) Two Hundred Fifty Thousand ($250,000.00) Dollars per annum during the
period commencing on October 1, 1998 through the balance of the Term. Such
salary shall be subject to periodic increases as shall be determined by the
Board of Directors of the Corporation."
3. Section 6 of the Managing Director's Agreement is hereby re-titled
"Employment Benefits" and the last sentence thereof is hereby amended in its
entirety to read as follows:
"The Corporation shall also provide Susan with (i) a clothing
expense allowance in the amount of ten thousand and 00/100 ($10,000.00) dollars
for the first year of the Term and fifteen thousand and 00/100 ($15,000.00)
dollars for each remaining year of the Term and (ii) a leased automobile of
Susan's choice throughout the Term."
4. Subparagraph (a) and (b) of Section 7 of the Managing Director's
Agreement are hereby amended and restated in their entirety to read as follows:
"7. Termination.
(a) The Corporation may, at its election in accordance with the
procedures more particularly set forth below, terminate this agreement for
cause. For purposes of this agreement, "cause" shall be defined as and limited
to the following: (i) a material breach by Susan of any material term of this
agreement which causes substantial damage to the reputation, business or
property of the Corporation, any of the Corporation's affiliates or any of the
Corporation's (or any affiliate's) customers and which shall not have been cured
within thirty (30) days of receipt by Susan of notice of such breach; (ii) a
continued failure of Susan after thirty (30) days' notice of a prior failure to
devote Susan's full active business time (as more particularly described in
Section 4 above) to the performance of Susan's duties hereunder; (iii) an act of
willful misconduct in the performance of Susan's duties hereunder which causes
substantial damage to the reputation, business or property of the Corporation,
any of the Corporation's affiliates or any
<PAGE> 3
of the Corporation's customers including, without limitation, any oral or
written misrepresentation relating to the Corporation or any of the
Corporation's (or any affiliate's) customers; (iv) conviction of a felony; or
(v) substantial, continuing and willful improper performance or non-performance
of any of Susan's material duties hereunder. For purposes of this subsection
(a), no act, or failure to act, on Susan's part shall be considered "willful"
unless done, or omitted to be done, by her not in good faith or without
reasonable belief that her action or omission was in the best interests of the
Corporation. Notwithstanding the foregoing, Susan shall not be deemed to have
been terminated for cause without (i) thirty (30) days' notice to Susan setting
forth the reasons for the Corporation's intention to terminate for cause, (ii)
an opportunity for Susan, together with her counsel, to be heard before the
Corporation's board of directors, and (iii) delivery to Susan of a Notice of
Termination as defined in subsection (d) below from an executive officer of the
Corporation finding that in the good faith opinion of the Corporation's Board of
Directors or in the good faith opinion of the Board of Directors of FPC, Susan
was guilty of conduct set forth or described above in justifying the
Corporation's termination of Susan's employment for cause and specifying the
particulars thereof in detail.
(b) Susan may terminate her employment under this agreement for Good
Reason (as hereinafter defined). For purposes of this agreement, "Good Reason"
shall mean (i) a Change of Control (as defined below) of the Corporation or of
FPC which shall have been in effect for a period of at least ninety (90)
consecutive days; provided, however, that Susan shall be unable to work
harmoniously and effectively with the personnel constituting the new management
of the Corporation resulting from such Change of Control (if any), (ii) a
failure by the Corporation to comply with any material provision of this
agreement which noncompliance shall have a material adverse effect upon Susan
and which shall not have been cured within thirty (30) days after notice of such
noncompliance has been given by Susan to the Corporation pursuant to this
agreement, (iii) if Susan's management functions, duties or responsibilities or
any other material aspect of Susan's employment shall have been materially and
adversely changed by the Corporation for a period in excess of thirty (30)
consecutive days notwithstanding Susan's written objection thereto or (iv) any
purported termination of Susan's employment which is not properly effected
pursuant to a Notice of Termination satisfying the requirements of subsection
(d) below (and for purposes of this agreement no such purported termination
shall be effective)."
5. Section 8 of the Managing Director's Agreement is hereby amended and
restated in its entirety to read as follows:
"8. Compensation Upon Termination or During Disability.
(a) During any period that Susan fails to perform her duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), Susan shall continue to receive her full salary at the
rate then in effect for such period and all employment benefits due to Susan
until her employment is terminated pursuant to Section 7 above, provided that
payments so made to Susan during the disability period shall be reduced by the
sum of the amounts, if any, payable to Susan at or prior to the time of any such
payment under disability benefit plans of the Corporation and which were not
previously applied to reduce any such payment.
(b) If Susan's employment is terminated by her death, the
Corporation shall pay to Susan's spouse, or if she leaves no spouse, to her
estate, within thirty (30) days of Susan's death, all salary and employment
benefits due to Susan accrued through the date of her death.
<PAGE> 4
(c) If Susan's employment shall be properly terminated for cause
pursuant to all of the applicable provisions of this agreement, the Corporation
shall pay Susan her full salary only through the Date of Termination at the rate
in effect at the time Notice of Termination is given and the Corporation shall
have no further obligations to Susan under or pursuant to this Agreement.
(d) If (i) in breach of this agreement, the Corporation shall
terminate Susan's employment other than pursuant to subsection 7(a) above
(termination for cause) or Section 14 below (termination by reason of death or
disability)(it being understood that a purported termination by the Corporation
pursuant to subsection 7(a) above or Section 14 below which is disputed and
finally determined not to have been proper shall be deemed a termination by the
Corporation in breach of this agreement) or (ii) Susan shall terminate her
employment for Good Reason, then
(I) the Corporation shall pay Susan her full salary and all
employment benefits due to Susan through the Date of Termination at the rate in
effect at the time the Notice of Termination is given;
(II) in lieu of any further salary payments to Susan for
periods subsequent to the Date of Termination, the Corporation shall pay to
Susan, as severance pay (and not as a penalty to the Corporation), an amount
equal to the product of (A) Susan's annual base salary rate in effect as of the
Date of Termination, multiplied by (B) the number two (2), such payment to be
made (X) if resulting from a termination based on a Change of Control of the
Corporation or of FPC, in a lump sum on or before the thirtieth (30th) day
following the Date of Termination, or (Y) if resulting from any other cause, in
substantially equal semimonthly installments on the fifteenth and last days of
each month commencing with the month in which the Date of Termination occurs and
continuing for forty-eight (48) consecutive semimonthly payment dates (including
the first such date as aforesaid), without interest; and
(III) in addition to the payments referred to in clause (I) and
(II) above, if termination of Susan's employment arises out of a breach by the
Corporation of this agreement, the Corporation shall also pay to Susan (i) the
severance payment of Three Hundred Fifty Thousand ($350,000.00) Dollars payable
pursuant to subsection 2(b) of this agreement plus (ii) all other damages to
which Susan may be entitled as a result of such breach, including damages for
any and all loss of benefits to Susan under the Corporation's employee benefit
plans (other than the Corporation's Bonus Compensation Plan) which Susan would
have received if the Company had not breached this agreement and had Susan's
employment continued for the full term provided in Section 2 hereof.
(e) Unless Susan's employment is properly terminated by the
Corporation for cause, the Corporation shall maintain in full force and effect,
for the continued benefit of Susan for the greater of the number of years
(including partial years) remaining in the term of employment hereunder or the
number two (2), all employee benefit plans and programs in which Susan was
entitled to participate immediately prior to the Date of Termination, provided
that Susan's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that Susan's participation
in any such plan or program is barred, the Corporation shall arrange to provide
Susan with benefits substantially similar to those which Susan would otherwise
have been entitled to receive under such plans and programs from which her
continued participation is barred.
<PAGE> 5
(f) Unless Susan's employment is properly terminated by the
Corporation for cause, Susan's Annual Bonus shall continue to be paid after the
Date of Termination for a period not to exceed six (6) months with respect to
all unfinished projects for which the Corporation shall have been engaged as of
the Date of Termination. The amount of Susan's Annual Bonus payable subsequent
to the Date of Termination as aforesaid shall be based upon the Corporation's
net profits before taxes which are allocable to such projects, as determined by
the Corporation's outside accounting firm, subject to review and approval by the
accounting firm which prepares the consolidated financial statements for all of
the companies affiliated with FPC, in accordance with generally accepted
accounting principles, consistently applied, as if the Corporation were not a
member of an affiliated group of corporations.
(g) The Corporation may withhold from any payments or other benefits
payable to Susan pursuant to this Section 8 or any other provision of this
agreement all federal, state, city or other taxes as shall be required pursuant
to any law, government regulation or ruling."
6. Section 14 of the Managing Director's Agreement is hereby amended by
the addition of the following words at the end thereof: "except as otherwise
specifically set forth in Section 8 above".
7. The following provisions are hereby added as Section 23 of the
Managing Director's Agreement:
"Restated Agreement. This agreement has been restated and amended
effective as of October 1, 1998 to incorporate the provisions of the First
Amendment to the Managing Director's Agreement dated as of September 11, 1997 by
and between the Corporation and Susan."
8. Any capitalized term not specifically defined herein shall have the
meaning ascribed to such term in the Managing Director's Agreement.
9. Except as otherwise set forth in this agreement, all of the terms
and provisions of the Managing Director's Agreement, shall remain unmodified and
in full force and effect.
10. The covenants, agreements, terms, provisions and conditions
contained in this agreement shall bind and inure to the benefit of the parties
hereto and their respective heirs, successors, legal representatives and
permitted assigns, if any.
11. This agreement may not be modified orally, but only by an agreement
in writing signed by the party against whom enforcement or any waiver, change,
modification or discharge is sought.
<PAGE> 6
12. In the event of any inconsistency between the terms and provisions
of this agreement and the terms and provisions of the Shareholders Agreement,
the terms and provisions of this agreement shall govern and be binding.
In witness whereof, the parties hereto have executed this agreement as of the
day and year first above written.
WITNESS:
Michaelson Kelbick Partners Inc.
By: /s/ Hillary Kelbick
- ------------------------------ -----------------------------------
Hillary Kelbick, Managing Director
By: /s/ Susan Michaelson
- ------------------------------ -----------------------------------
Susan Michaelson, Managing Director
/s/ Susan Michaelson
- ------------------------------ -----------------------------------
Susan Michaelson, Individually
The provisions of this agreement are hereby consented to:
Financial Performance Corporation
By: /s/ William F. Finley
----------------------------
William F. Finley, President
<PAGE> 1
Exhibit 10.79
FIRST AMENDMENT TO MANAGING DIRECTOR'S AGREEMENT
Agreement made as of October 1, 1998, by and between Michaelson Kelbick Partners
Inc., a New York corporation with offices at 335 Madison Avenue, 8th Floor, New
York, New York 10017(the "Corporation"), and Hillary Kelbick, residing at 105
Wood Terrace, Leonia, New Jersey 07605 ("Hillary").
W I T N E S S E T H:
Whereas, the parties hereto entered into a managing director's agreement dated
as of September 11, 1997 (the "Managing Director's Agreement"); and
Whereas, the parties hereto desire to amend and/or supplement the Managing
Director's Agreement as herein set forth.
Now, therefore, in consideration of the premises, the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Section 2 of the Managing Director's Agreement is hereby amended and
restated in its entirety to read as follows:
"Term.
(a) The Term of this agreement is three (3) years, commencing on
September 11, 1997 and ending on September 10, 2000, unless earlier terminated
by the Corporation or by Hillary in accordance with the provisions hereof. This
agreement shall be automatically renewed for periods of one (1) year each (the
"Renewal Term") unless either party shall give the other notice of her or its
desire to terminate this agreement no later than on the June 1st immediately
preceding the expiration of the then current term, in which event Hillary's
employment shall terminate at the end of the Term or the applicable Renewal
Term, as the case may be. The Term and the Renewal Term are hereinafter
collectively referred to as the Term.
(b) If Hillary has not given notice to the Corporation on or before
June 1, 2000 that she elects not to renew this agreement at the expiration of
the Term and the Corporation gives notice to Hillary that it elects not to renew
this agreement at the expiration of the Term, then and only in such event,
provided that Hillary's employment is not properly terminated by the Corporation
for cause pursuant to and in accordance with the provisions of Section 7 below,
in addition to and without limitation of any other compensation, severance
payments or employment benefits which may be or become due from the Corporation
to Hillary pursuant to this agreement (but not in addition to any severance
payment which may be due pursuant to the provisions of subparagraph (c) of this
Section 2, it being understood that such severance payment and the severance
payment payable pursuant to this subparagraph (b) are mutually exclusive), the
Corporation shall pay to Hillary, within ten (10) days following the expiration
of the Term, a severance payment in the amount of Three Hundred Fifty Thousand
($350,000.00) Dollars.
<PAGE> 2
(c) If Hillary elects not to renew this Agreement at the expiration
of the Term and Hillary's employment is not properly terminated by the
Corporation for cause pursuant to and in accordance with the provisions of
Section 7 below, then and only in such event, in addition to and without
limitation of any other compensation, severance payments or employment benefits
which may be or become due from the Corporation to Hillary pursuant to this
agreement (but not in addition to any severance payment which may be due
pursuant to the provisions of subparagraph (b) of this Section 2, it being
understood that such severance payment and the severance payment payable
pursuant to this subparagraph (c) are mutually exclusive), the Corporation shall
pay to Hillary, within ten (10) days following the expiration of the Term, a
severance payment in the amount of Two Hundred Fifty Thousand ($250,000.00)
Dollars.
(d) For purposes of this agreement, the term "employment benefits"
shall be deemed to include Hillary's Annual Bonus (as such term is hereinafter
defined)."
2. Subparagraph (a) of Section 5 of the Managing Director's Agreement
is hereby amended and restated in its entirety to read as follows:
"(a) For all services rendered by Hillary pursuant to this
agreement, the Corporation shall pay Hillary an annual salary payable bi-weekly,
in arrears, as follows: (i) One Hundred Fifty Thousand ($150,000.00) Dollars per
annum during the period commencing on September 11, 1997 through September 30,
1998; and (ii) Two Hundred Fifty Thousand ($250,000.00) Dollars per annum during
the period commencing on October 1, 1998 through the balance of the Term. Such
salary shall be subject to periodic increases as shall be determined by the
Board of Directors of the Corporation."
3. Section 6 of the Managing Director's Agreement is hereby re-titled
"Employment Benefits" and the last sentence thereof is hereby amended in its
entirety to read as follows:
"The Corporation shall also provide Hillary with (i) a clothing
expense allowance in the amount of ten thousand and 00/100 ($10,000.00) dollars
for the first year of the Term and fifteen thousand and 00/100 ($15,000.00)
dollars for each remaining year of the Term and (ii) a leased automobile of
Hillary's choice throughout the Term."
4. Subparagraphs (a) and (b) of Section 7 of the Managing Director's
Agreement are hereby amended and restated in their entirety to read as follows:
"7. Termination.
(a) The Corporation may, at its election in accordance
with the procedures more particularly set forth below, terminate this agreement
for cause. For purposes of this agreement, "cause" shall be defined as and
limited to the following: (i) a material breach by Hillary of any material term
of this agreement which causes substantial damage to the reputation, business or
property of the Corporation, any of the Corporation's affiliates or any of the
Corporation's (or any affiliate's) customers and which shall not have been cured
within thirty (30) days of receipt by Hillary of notice of such breach; (ii) a
continued failure of Hillary after thirty (30) days' notice of a prior failure
to devote Hillary's full active business time (as more particularly described in
Section 4 above) to the performance of Hillary's duties hereunder; (iii) an act
of willful misconduct in the performance of Hillary's duties hereunder which
causes substantial damage to the reputation, business or property of the
Corporation, any of the
<PAGE> 3
Corporation's affiliates or any of the Corporation's customers including,
without limitation, any oral or written misrepresentation relating to the
Corporation or any of the Corporation's (or any affiliate's) customers; (iv)
conviction of a felony; or (v) substantial, continuing and willful improper
performance or non-performance of any of Hillary's material duties hereunder.
For purposes of this subsection (a), no act, or failure to act, on Hillary's
part shall be considered "willful" unless done, or omitted to be done, by her
not in good faith or without reasonable belief that her action or omission was
in the best interests of the Corporation. Notwithstanding the foregoing, Hillary
shall not be deemed to have been terminated for cause without (i) thirty (30)
days' notice to Hillary setting forth the reasons for the Corporation's
intention to terminate for cause, (ii) an opportunity for Hillary, together with
her counsel, to be heard before the Corporation's board of directors, and (iii)
delivery to Hillary of a Notice of Termination as defined in subsection (d)
below from an executive officer of the Corporation finding that in the good
faith opinion of the Corporation's Board of Directors or in the good faith
opinion of the Board of Directors of FPC, Hillary was guilty of conduct set
forth or described above in justifying the Corporation's termination of
Hillary's employment for cause and specifying the particulars thereof in detail.
(b) Hillary may terminate her employment under this agreement for
Good Reason (as hereinafter defined). For purposes of this agreement, "Good
Reason" shall mean (i) a Change of Control (as defined below) of the Corporation
or of FPC which shall have been in effect for a period of at least ninety (90)
consecutive days; provided, however, that Hillary shall be unable to work
harmoniously and effectively with the personnel constituting the new management
of the Corporation resulting from such Change of Control (if any), (ii) a
failure by the Corporation to comply with any material provision of this
agreement which noncompliance shall have a material adverse effect upon Hillary
and which shall not have been cured within thirty (30) days after notice of such
noncompliance has been given by Hillary to the Corporation pursuant to this
agreement, (iii) if Hillary's management functions, duties or responsibilities
or any other material aspect of Hillary's employment shall have been materially
and adversely changed by the Corporation for a period in excess of thirty (30)
consecutive days notwithstanding Hillary's written objection thereto or (iv) any
purported termination of Hillary's employment which is not properly effected
pursuant to a Notice of Termination satisfying the requirements of subsection
(d) below (and for purposes of this agreement no such purported termination
shall be effective). "
5. Section 8 of the Managing Director's Agreement is hereby amended and
restated in its entirety to read as follows:
"8. Compensation Upon Termination or During Disability.
(a) During any period that Hillary fails to perform her duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), Hillary shall continue to receive her full salary at the
rate then in effect for such period and all employment benefits due to Hillary
until her employment is terminated pursuant to Section 7 above, provided that
payments so made to Hillary during the disability period shall be reduced by the
sum of the amounts, if any, payable to Hillary at or prior to the time of any
such payment under disability benefit plans of the Corporation and which were
not previously applied to reduce any such payment.
(b) If Hillary's employment is terminated by her death, the
Corporation shall pay to Hillary's spouse, or if she leaves no spouse, to her
estate, within thirty (30) days of Hillary's death, all salary and employment
benefits due to Hillary accrued through the date of her death.
<PAGE> 4
(c) If Hillary's employment shall be properly terminated for cause
pursuant to all of the applicable provisions of this agreement, the Corporation
shall pay Hillary her full salary only through the Date of Termination at the
rate in effect at the time Notice of Termination is given and the Corporation
shall have no further obligations to Hillary under or pursuant to this
Agreement.
(d) If (i) in breach of this agreement, the Corporation shall
terminate Hillary's employment other than pursuant to subsection 7(a) above
(termination for cause) or Section 14 below (termination by reason of death or
disability)(it being understood that a purported termination by the Corporation
pursuant to subsection 7(a) above or Section 14 below which is disputed and
finally determined not to have been proper shall be deemed a termination by the
Corporation in breach of this agreement) or (ii) Hillary shall terminate her
employment for Good Reason, then
(I) the Corporation shall pay Hillary her full salary and all
employment benefits due to Hillary through the Date of Termination at the rate
in effect at the time the Notice of Termination is given;
(II) in lieu of any further salary payments to Hillary for
periods subsequent to the Date of Termination, the Corporation shall pay to
Hillary, as severance pay (and not as a penalty to the Corporation), an amount
equal to the product of (A) Hillary's annual base salary rate in effect as of
the Date of Termination, multiplied by (B) the number two (2), such payment to
be made (X) if resulting from a termination based on a Change of Control of the
Corporation or of FPC, in a lump sum on or before the thirtieth (30th) day
following the Date of Termination, or (Y) if resulting from any other cause, in
substantially equal semimonthly installments on the fifteenth and last days of
each month commencing with the month in which the Date of Termination occurs and
continuing for forty-eight (48) consecutive semimonthly payment dates (including
the first such date as aforesaid), without interest; and
(III) in addition to the payments referred to in clause (I) and
(II) above, if termination of Hillary's employment arises out of a breach by the
Corporation of this agreement, the Corporation shall also pay to Hillary (i) the
severance payment of Three Hundred Fifty Thousand ($350,000.00) Dollars payable
pursuant to subsection 2(b) of this agreement plus (ii) all other damages to
which Hillary may be entitled as a result of such breach, including damages for
any and all loss of benefits to Hillary under the Corporation's employee benefit
plans (other than the Corporation's Bonus Compensation Plan) which Hillary would
have received if the Company had not breached this agreement and had Hillary's
employment continued for the full term provided in Section 2 hereof.
(e) Unless Hillary's employment is properly terminated by the
Corporation for cause, the Corporation shall maintain in full force and effect,
for the continued benefit of Hillary for the greater of the number of years
(including partial years) remaining in the term of employment hereunder or the
number two (2), all employee benefit plans and programs in which Hillary was
entitled to participate immediately prior to the Date of Termination, provided
that Hillary's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that Hillary's participation
in any such plan or program is barred, the Corporation shall arrange to provide
Hillary with benefits substantially similar to those which Hillary would
otherwise have been entitled to receive under such plans and programs from which
her continued participation is barred.
<PAGE> 5
(f) Unless Hillary's employment is properly terminated by the
Corporation for cause, Hillary's Annual Bonus shall continue to be paid after
the Date of Termination for a period not to exceed six (6) months with respect
to all unfinished projects for which the Corporation shall have been engaged as
of the Date of Termination. The amount of Hillary's Annual Bonus payable
subsequent to the Date of Termination as aforesaid shall be based upon the
Corporation's net profits before taxes which are allocable to such projects, as
determined by the Corporation's outside accounting firm, subject to review and
approval by the accounting firm which prepares the consolidated financial
statements for all of the companies affiliated with FPC, in accordance with
generally accepted accounting principles, consistently applied, as if the
Corporation were not a member of an affiliated group of corporations.
(g) The Corporation may withhold from any payments or other benefits
payable to Hillary pursuant to this Section 8 or any other provision of this
agreement all federal, state, city or other taxes as shall be required pursuant
to any law, government regulation or ruling.
6. Section 14 of the Managing Director's Agreement is hereby amended by
the addition of the following words at the end thereof: "except as otherwise
specifically set forth in Section 8 above".
7. The following provisions are hereby added as Section 23 of the
Managing Director's Agreement:
"Restated Agreement. This agreement has been restated and amended
effective as of October 1, 1998 to incorporate the provisions of the First
Amendment to the Managing Director's Agreement dated as of September 11, 1997 by
and between the Corporation and Hillary."
8. Any capitalized term not specifically defined herein shall have the
meaning ascribed to such term in the Managing Director's Agreement.
9. Except as otherwise set forth in this agreement, all of the terms
and provisions of the Managing Director's Agreement, shall remain unmodified and
in full force and effect.
10. The covenants, agreements, terms, provisions and conditions
contained in this agreement shall bind and inure to the benefit of the parties
hereto and their respective heirs, successors, legal representatives and
permitted assigns, if any.
11. This agreement may not be modified orally, but only by an agreement
in writing signed by the party against whom enforcement or any waiver, change,
modification or discharge is sought.
<PAGE> 6
12. In the event of any inconsistency between the terms and provisions
of this agreement and the terms and provisions of the Shareholders Agreement,
the terms and provisions of this agreement shall govern and be binding.
In witness whereof, the parties hereto have executed this agreement as of the
day and year first above written.
WITNESS:
Michaelson Kelbick Partners Inc.
By: /s/ Hillary Kelbick
- ------------------------------- -----------------------------------
Hillary Kelbick, Managing Director
By: /s/ Susan Michaelson
- ------------------------------- -----------------------------------
Susan Michaelson, Managing Director
/s/ Hillary Kelbick
- ------------------------------- -----------------------------------
Hillary Kelbick, Individually
The provisions of this agreement are hereby consented to:
Financial Performance Corporation
By: /s/ William F. Finley
----------------------------
William F. Finley, President
<PAGE> 1
Exhibit 10.80
RESTATED AND AMENDED SHAREHOLDERS' AGREEMENT
Shareholders' agreement made as of the 18th day of October, 1994, by and among
Michaelson Kelbick Partners Inc. (originally known as FPC Consulting Corp.) a
New York corporation with offices at 335 Madison Avenue, 11th Floor, New York,
New York (hereinafter referred to as "MKP" or the "Corporation"), Financial
Performance Corporation, a New York corporation with an address at 335 Madison
Avenue, 11th Floor, New York, New York (hereinafter referred to as "FPC"), Susan
Michaelson, an individual residing at 684 Hill Farm Road, Fairfield, Connecticut
06430 (hereinafter referred to as "Susan") and Hillary Kelbick, an individual
residing at 105 Wood Terrace, Leonia, New Jersey 07605 (hereinafter referred to
as "Hillary").
W I T N E S S E T H :
Whereas, FPC has caused MKP to be formed under the laws of the State of New
York;
Whereas, MKP is authorized to issue 200 shares of common stock, no par value per
share;
Whereas, FPC, Susan and Hillary collectively own all of the issued and
outstanding shares of common stock of MKP; and
Whereas, FPC, Susan and Hillary desire to promote their mutual interests and the
interests of MKP by imposing certain restrictions and obligations with respect
to (i) the shares of common stock of MKP registered in their respective names
and (ii) the future operation and management of MKP.
Now, therefore, in consideration of the premises and the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions.
As used herein, the following terms shall have the following meanings:
(a) "Agreement" shall mean this shareholders' agreement.
(b) "Stock" shall mean any and all shares of MKP's common stock
owned by the Shareholders (as hereinafter defined) as of the date hereof or
hereafter acquired, regardless of how or from whom acquired. The term shall also
include fractional shares of Stock, options and warrants to purchase Stock, and
shares received by way of dividend or upon an increase, reduction, substitution
or reclassification of Stock, or upon any merger, consolidation or
reorganization of MKP.
(c) "Shareholders" shall mean FPC, Susan and Hillary and any other
person or entity who or which acquires any Stock and becomes a party to this
Agreement pursuant to the terms hereof.
<PAGE> 2
(d) "Individual Shareholders" shall mean Susan and Hillary.
(e) "Corporate Shareholder" shall mean FPC.
(f) "Shareholder" shall mean any of the Shareholders.
(g) "Agreed Value" shall mean the value of the Stock as determined
pursuant to the provisions of Section 8 below.
2. Ownership of Shares. The Shareholders each own stock in MKP as
follows:
Name Number of Shares
---- ----------------
FPC 80
Susan 10
Hillary 10
3. Restriction on Transfer of Stock of Individual Shareholders.
3.1. No Individual Shareholder shall sell, assign, transfer, pledge,
give, bequeath or otherwise in any manner encumber or dispose of, directly or
indirectly, any Stock (or any interest therein) or the stock certificate or
certificates issued with respect to any Stock now or hereafter at any time owned
by any such Individual Shareholder, except that Stock owned by an Individual
Shareholder may be: (i) to the extent permitted under applicable law, pledged as
collateral in connection with any loan or other financing obtained by MKP; and
(ii) transferred as may be permitted by this Agreement or as may be consented to
in writing by all of the parties to this Agreement.
3.2. With respect to any person or entity acquiring any Stock in
violation of the terms and conditions of this Agreement: (i) such person or
entity shall not be entitled to vote such Stock, (ii) no dividend shall be paid
or distribution made on such Stock; and (iii) MKP shall neither transfer on its
books the registered ownership of any such Stock, nor issue any certificate in
lieu of such Stock, nor issue any new Stock unless and until there has been
compliance with each of the conditions set forth herein affecting such Stock or
certificates.
4. Term of Agreement. This Agreement shall terminate upon the
occurrence of any of the following events:
(a) cessation of MKP's business operations;
(b) consolidation or merger with any corporation or other entity as
a result of which MKP is not the surviving entity; or
(c) bankruptcy, receivership or dissolution of MKP.
Unless earlier terminated as provided above, this Agreement shall continue in
effect until September 30, 2004. All of the agreements, understandings and
obligations herein contained which expressly or by implication subsist after
termination of this Agreement shall survive such termination.
2
<PAGE> 3
5. Conditions for Transfer of Stock to a Non-Party.
5.1. If either of the Individual Shareholders desires to make during
her lifetime a bona fide disposition of all or part of her Stock to a person,
partnership, corporation or other entity who or which is not a party to this
Agreement (hereinafter referred to as a "Non-Party") and who or which is
permitted to hold such Stock under applicable law, such Individual Shareholder
(hereinafter sometimes referred to as the "Offeror"), shall first grant
successive rights of first refusal (hereinafter referred to as the "Options") to
MKP and to the Corporate Shareholder as follows:
(a) to MKP, which shall have thirty (30) days to exercise such
option in full but not in part; and
(b) to the Corporate Shareholder, which shall have thirty (30) days
to exercise such option in full but not in part.
Each Option will be considered granted successively and will only be effective
as to the Corporate Shareholder if MKP does not exercise its option in full.
5.2. Each Option shall be granted by a written notice of offer to
MKP and to the Corporate Shareholder, stating the number of shares of Stock
offered, the price and terms of the proposed disposition, and the name and
address of the Non-Party to whom the Offeror desires to transfer the Stock being
offered. As used herein, the term "disposition" shall include, but shall not be
limited to, any disposition by sale, delivery, assignment, gift, exchange or
transfer.
5.3. Each Option shall be exercised (to the extent herein permitted)
by giving to the Offeror a written notice of exercise prior to the expiration of
the applicable Option exercise period.
5.4. With respect to the exercise of any Option, the purchase price
for the Stock subject to such Option shall be the Agreed Value of such Stock;
provided, however, that any Stock offered by an Offeror who proposes to dispose
of her Stock at a price less than Agreed Value, or upon terms more favorable to
the Non-Party than those set forth in Section 5.5 below, or both, shall be sold
at such proposed lower price or upon such more favorable proposed terms, or
both.
5.5. The purchase price shall be payable as follows: (i) ten (10%)
percent of the purchase price in cash or by certified check of the purchaser
delivered at the closing; and (ii) the balance of the purchase price in four
equal, consecutive, annual installments commencing on the first anniversary of
the closing date, evidenced by a non-negotiable promissory note made by the
purchasing corporation, payable to the Offeror with interest at the applicable
federal rate for a note such as said promissory note, as promulgated by the
Internal Revenue Service (but in no case shall the interest rate be higher than
the highest rate permitted to be paid in the State of New York under its
applicable usury laws). Said promissory note shall provide for, (i) the right of
acceleration of the unpaid principal sum, together with accrued interest
thereon, in the event of any default in the payment of any installment of
principal or interest thereon; (ii) the right of prepayment, in whole or in
part, at any time, without penalty, but with interest accrued to the date of
prepayment; and (iii) the waiver of presentment, demand, protest and notice of
dishonor. The indebtedness evidenced by the promissory note shall be secured in
accordance with the provisions of Section 9 below.
3
<PAGE> 4
5.6. If the surplus of the purchasing corporation shall prove to be
insufficient (under then existing laws) to authorize the purchasing corporation
to purchase the Stock of the Offeror in accordance with the provisions of this
Section, then the purchasing corporation shall perform such acts as may be
necessary and lawful to increase such surplus to an amount sufficient to
authorize the purchase of the Stock of the Offeror, including, but not limited
to, the following: (i) a recapitalization of the purchasing corporation so as to
reduce the stated capital and increase its surplus; (ii) a reappraisal of the
assets of the purchasing corporation (including good will, if any) to reflect
the market value of such assets on the books of the purchasing corporation, if
such value exceeds the book value thereof, so as to increase such surplus; and
(iii) a contribution by the other shareholder(s) of the purchasing corporation
of cash or property, or both, to the purchasing corporation so as to increase
its surplus to an amount sufficient to enable it to lawfully effectuate such
purchase.
5.7. Any such sale shall be closed at the offices of MKP at a date
and time (during ordinary business hours) fixed by MKP, being not less than
twenty (20) nor more than thirty (30) days after the date on which the
purchasing corporation gave notice of its intention to exercise the Option. At
such time, such purchasing corporation shall make payment of the purchase price
against receipt of such Stock by the escrow agent described in Section 9 below
in proper form for transfer to the purchasing corporation and such other
documents as counsel for the purchasing corporation shall reasonably request.
5.8. If MKP and the Corporate Shareholder shall fail to exercise
their respective Options to purchase all of the Offeror's Stock as aforesaid,
then in such event the Offeror shall be permitted to dispose of her Stock,
provided: (i) such disposition shall occur within thirty (30) days after the
expiration of all of the Option exercise periods; (ii) such disposition shall be
to the Non-Party described in, and at a price and upon terms not less favorable
to the Offeror than those set forth in, the notice of offer to MKP and the
Corporate Shareholder; and (iii) the Non-Party acquiring such Stock shall
execute and deliver to each party hereto, as a condition precedent to any
disposition permitted hereunder, an agreement acknowledging that all Stock
transferred or to be transferred is and shall continue to be subject to the
terms, conditions and restrictions of this Agreement and agreeing to be bound by
this Agreement. If a disposition of the Stock of the Offeror in accordance with
the notice of offer to the Corporate Shareholder shall not have been consummated
upon the expiration of the thirty (30) day period referred to in (i) above, then
all of the Stock shall again be subject to all of the restrictions set forth in
this Agreement.
5.9. Any attempt by an Individual Shareholder to make a disposition
of her Stock in violation of the provisions of this Agreement shall be deemed an
offer of the Stock of such Individual Shareholder pursuant to the provisions of
this Section 5, provided, however, that the purchase price for the Stock so
offered shall be fifty (50%) percent of the Agreed Value.
6. Conditions for Transfer of Stock Upon the Occurrence of the Death of
an Individual Shareholder.
6.1. Upon the death of either of the Individual Shareholders
(hereinafter referred to as the "Deceased Shareholder"), at the option of MKP
exercisable within one hundred twenty (120) days after the death of the Deceased
Shareholder by notice from MKP to the Estate (hereinafter defined), the
executor(s) or administrator(s) of the estate of the Deceased Shareholder
(hereinafter
4
<PAGE> 5
sometimes referred to as the "Estate") shall sell, and MKP shall redeem with its
surplus, all of the Stock owned by the Deceased Shareholder at the time of her
death.
6.2. If the Corporation shall exercise its option pursuant to
Section 6.1 above, the purchase price for the Stock shall be the Agreed Value of
such Stock. The purchase price shall be payable as follows: (i) an amount equal
to ten (10%) percent of the purchase price shall be paid in cash or by certified
check at the closing; and (ii) the balance of the purchase price shall be paid
in four (4) equal, consecutive annual installments commencing on the first
anniversary of the closing date, evidenced by a non-negotiable promissory note
made by MKP payable to the Estate with interest at the rate established pursuant
to Section 5.5 above. Any promissory note required under this Section 6.2 shall
provide for, (i) the right of acceleration of the unpaid principal sum, together
with accrued interest thereon, in the event of any default in the payment of any
installment of principal or interest thereon; (ii) the right of prepayment, in
whole or in part, at any time, without penalty, but with interest accrued to the
date of prepayment; and (iii) the waiver of presentment, demand, protest and
notice of dishonor. The indebtedness evidenced by the promissory note shall be
secured in accordance with the provisions of Section 9 below. The sale shall be
closed in accordance with the provisions of Section 5.7 above, except that any
such sale shall be closed at the offices of MKP at a date and time (during
ordinary business hours) fixed by MKP but in no event more than one hundred
fifty (150) days following the date of death of such Individual Shareholder.
7. Purchase of Stock by MKP in Event of Termination of Employment of
Individual Shareholder.
If either of the Individual Shareholders terminates her employment with MKP or
if MKP terminates the employment of either of the Individual Shareholders for
any reason pursuant to the terms of the Managing Director's Agreement with such
Individual Shareholder dated as of September 11, 1997, as amended by agreement
dated as of October 1, 1998, or any successor or substitute agreement
(hereinafter, the "Employment Agreement"), or upon the expiration of the
Employment Agreement without extension or renewal thereof, then the following
provisions shall apply:
7.1. Each of the Individual Shareholders shall have the right to
require MKP to purchase from such Individual Shareholder all (but not less than
all) of the Stock then owned by such Individual Shareholder. Each Individual
Shareholder shall exercise her right hereunder by giving MKP written notice of
exercise at any time during the sixty (60) day period commencing on the date of
termination of employment of such Individual Shareholder. The aggregate purchase
price to be paid by MKP shall be the Cash Value (hereinafter defined) of the
Stock then owned by the Individual Shareholder; provided, however, that if MKP
terminates the Employment Agreement of such Individual Shareholder for "cause"
as such term is defined in the Employment Agreement, then the aggregate purchase
price to be paid by MKP shall be an amount equal to fifty (50%) percent of the
Cash Value of such Stock. The purchase price shall be payable in accordance with
Section 5.5 above and the closing shall take place in accordance with the
provisions of Section 5.6 above, except that any such sale shall be closed at
the offices of MKP at a date and time (during ordinary business hours) fixed by
the Corporation being not later than sixty (60) days after the date on which the
Individual Shareholder shall have given its notice of exercise to MKP.
5
<PAGE> 6
7.2. If either of the Individual Shareholders does not exercise her
right to require MKP to purchase such Individual Shareholder's Stock pursuant to
the provisions of Section 7.1 above, then in such event MKP shall have the
right, but not the obligation, to purchase from such Individual Shareholder all
(but not less than all) of the Stock then owned by such Individual Shareholder.
MKP shall exercise its right hereunder by giving such Individual Shareholder
written notice of exercise at any time during the sixty (60) day period
commencing on the expiration of the sixty (60) day period such Individual
Shareholder shall have to notify MKP to purchase such Individual Shareholder's
Stock pursuant to the provisions of Section 7.1 above. The aggregate purchase
price to be paid by MKP for such Individual Shareholder's Stock shall be the
Agreed Value (hereinafter defined) of such Stock; provided, however, that if MKP
terminates the Employment Agreement of such Individual Shareholder for "cause"
as such term is defined in the Employment Agreement, then the aggregate purchase
price to be paid by MKP for such Individual Shareholder's Stock shall be an
amount equal to fifty (50%) percent of the Agreed Value of such Stock. The
purchase price shall be payable in accordance with Section 5.5 above and the
closing shall take place in accordance with the provisions of Section 5.6 above,
except that any such sale shall be closed at the offices of MKP at a date and
time (during ordinary business hours) fixed by the Corporation being not later
than sixty (60) days after the date on which MKP shall have given its notice of
exercise to the Individual Shareholder.
8. Cash Value and Agreed Value.
8.1 The Cash Value of a Shareholder's Stock for purposes of this
agreement shall be determined by the following formula:
Cash Value = A x (C-D)
-
B
Where:
A = the total number of outstanding shares of
Stock of MKP owned of record by the
Shareholder as of the date of termination of
employment of such Shareholder;
B = the total number of shares of Stock of MKP
which are issued and outstanding as of the
date of termination of employment of such
Shareholder;
C = the aggregate amount of cash and cash
equivalents reflected on MKP's financial
statements as of the last day of the fiscal
quarter immediately preceding the fiscal
quarter in which the date of termination of
employment of such Shareholder shall occur;
and
D = the aggregate amount of accounts payable
and other current liabilities reflected on
MKP's financial statements as of the last
day of the fiscal quarter immediately
preceding the fiscal quarter in which the
date of termination of employment of such
Shareholder shall occur.
6
<PAGE> 7
The Cash Value, as determined pursuant to this Section 8.1, shall be final,
conclusive and binding upon all parties hereto, including the legal
representative(s) of any deceased party.
8.2. The Agreed Value of a Shareholder's Stock for purposes of this
agreement shall be the fair market value of such Stock, as shall be mutually
determined by two investment banking firms with experience relating to the
business of MKP. One such firm shall be designated by MKP and the other firm
shall be designated by the Corporate Shareholder. The Agreed Value, as
determined pursuant to this Section 8.2, shall be final, conclusive and binding
upon all parties hereto, including the legal representative(s) of any deceased
party.
9. Delivery of Stock.
9.1. On the closing date of the sales provided for in Sections 5, 6,
and 7 hereof, the selling Shareholder, or the Estate of the selling Shareholder,
as the case may be, (hereinafter, such selling Shareholder and/or Estate, as the
case may be, are referred to as "Selling Shareholder or the Estate") shall
deliver to the purchaser of such Stock, certificates for the Stock being sold
endorsed in favor of such purchaser. In order to secure the performance of such
purchaser's obligations under any promissory note, such purchaser shall pledge
and give a security interest in and deliver certificates representing all of the
Stock purchased to an escrow agent (being any person, corporation, partnership
or other entity agreed to by such Selling Shareholder or the Estate, and such
purchaser, or if the parties cannot so agree as to the escrow agent, then the
attorneys regularly representing MKP shall be designated escrow agent, or such
attorneys shall designate any third party to serve as escrow agent), together
with a stock power duly endorsed in blank and in proper form to effectuate
transfer of such Stock. Concurrently with the delivery in escrow of the shares
of Stock being sold, if the selling Shareholder is then an officer, director or
employee of the Corporation, she shall deliver to the Corporation her
resignation as such. Upon payment in full of such promissory note, the Stock and
stock power held by the escrow agent shall be released to the purchaser of the
Stock. At the closing, a formal escrow agreement will be entered into among such
Selling Shareholder or the Estate, the purchaser of the Stock and the escrow
agent.
9.2. If the Selling Shareholder or the Estate shall fail to deliver
the Stock in accordance with the terms of this Agreement, then the purchaser of
such Stock may, at its option, in addition to all other available remedies, send
to the Selling Shareholder or the Estate, the first installment of the purchase
price for such Stock. Thereupon, the Corporation, upon notice to the Selling
Shareholder or the Estate shall: (i) cancel on its books the certificate or
certificates representing the Stock to be sold; (ii) issue, in lieu thereof, a
new certificate representing such Stock registered in the name of such
purchaser; and (iii) deliver such new certificate to such purchaser and,
thereupon, the Selling Shareholder or the Estate, shall not be entitled to
receive any subsequent installment of the purchase price and such purchaser
shall not be required to make any further installment payment, until the Selling
Shareholder or the Estate shall have delivered to such purchaser the original
certificate or certificates in accordance with the terms of this Agreement to be
held in escrow as herein set forth. If such Selling Shareholder or the Estate
shall be unable to furnish any original certificate because it has been lost or
destroyed, then the Selling Shareholder or the Estate shall pursue appropriate
procedures to be agreed upon with the Corporation in order to satisfy the
delivery requirements hereunder.
7
<PAGE> 8
9.3. Upon receipt of evidence of default of more than thirty (30)
days in the payment of any said promissory note after the giving of written
notice thereof, the escrow agent shall be authorized to sell the Stock held by
it by public sale, at which public sale the Selling Shareholder or the Estate
shall have the right to bid for and purchase the Stock being sold. However,
before offering the Stock for public sale, the escrow agent shall give the
purchaser of such Stock an opportunity to purchase the Stock at any time prior
to the public sale for an amount equal to the unpaid principal and interest on
such promissory note, plus the costs and expenses, including, without
limitation, reasonable legal fees incurred as a result of the purchaser's
default, in preparation for such sale. The escrow agent shall apply all
dividends and other distributions held by it and the proceeds from such sale:
(a) first, to the payment of any and all expenses of such
sale, including reasonable attorneys' fees;
(b) then, to the payment of the indebtedness to the Selling
Shareholder or the Estate; and
(c) any excess thereof to be paid over to the purchaser.
The Selling Shareholder or the Estate, shall also retain any and all available
rights and remedies at law and in equity. Upon the performance of its duties in
accordance with the provisions hereof, the escrow agent shall be relieved and
discharged of any and all obligations and liabilities hereunder and held
harmless for any act or omission to act except those constituting willful
misconduct.
9.4 During the period in which the Stock shall be held in escrow,
the Selling Shareholder or the Estate shall not be entitled to exercise any
voting rights with respect thereto. Upon receipt of satisfactory evidence of
payment in full by the purchaser of the Stock, the escrow agent shall forthwith
turn over to the purchaser the shares of Stock and any and all dividends or
property received by the escrow agent with respect thereto and not applied
against payment of such purchaser's promissory note.
10. Transfer Expenses. All expenses, taxes, charges, fees, levies or
other assessments, including, without limitation, income, inheritance, real and
personal property, sales or transfer taxes imposed by any governmental authority
in connection with the sales provided for in Sections 5, 6, and 7 hereof,
incurred by or imposed upon the Selling Shareholder or the Estate, MKP or the
Corporate Shareholder (if it is not the Selling Shareholder) shall be paid on
the closing date by the Selling Shareholder or the Estate.
11. Management of the Corporation and Voting.
11.1 During the term of this Agreement, the Shareholders shall vote
their Stock to provide for the following:
(a) The election and maintenance in office of Susan, Hillary,
William F. Finley, and two other individuals mutually acceptable to the parties
as the directors of the Corporation; and
8
<PAGE> 9
(b) The election and maintenance in office as officers of the
Corporation of the following individuals in the following respective offices:
Name Office
---- ------
Susan President/Treasurer/Managing Director
Hillary Vice President/Secretary/
Managing Director
William F. Finley Assistant Treasurer/
Assistant Secretary
11.2 At the first meeting of Shareholders to be held on or after the
date hereof, this Agreement shall be submitted to the meeting and a resolution
shall be adopted whereby MKP shall accept, ratify, and confirm the Agreement and
agree to be bound thereby. Any and all by-laws of the Corporation shall conform
to the provisions of this Agreement and shall not be in conflict therewith; if
any conflict exists or arises hereafter, the provisions of this Agreement shall
control and be binding.
12. Bank Accounts. MKP shall maintain one or more bank accounts. Checks
drawn on said accounts shall require the joint signatures of Susan and Hillary.
In addition, all checks in excess of ten thousand ($10,000.00) dollars in
respect of the first two hundred fifty thousand ($250,000.00) dollars of funds
expended by MKP shall require the additional signature of William F. Finley.
13. Authority. Any contract, agreement, note or other evidence of
indebtedness, assignment, deed, lease, loan agreement, mortgage or other
security instrument or arrangement and all other documents of which MKP is a
party shall require the joint signatures of any two officers of MKP.
14. Legend on Stock Certificates. The following statements shall be
inscribed on the face of all certificates representing shares of Stock with
respect to the shares represented by such certificates:
"The shares represented by this certificate are subject
to restrictions on transfer contained in that certain
Shareholders' Agreement, dated as of the 18th day of
October, 1994, a copy of which is on file at the
principal office of the Corporation, and any transfer of
shares represented by this certificate, or any interest
therein, in violation of said Agreement, shall be
invalid."
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or any applicable state securities laws, and
cannot be sold, transferred or otherwise disposed of to
any person or entity unless subsequently registered
thereunder or unless an applicable exemption therefrom
is available."
9
<PAGE> 10
15. Specific Performance. Since the Stock cannot be readily purchased or
sold in the open market, the Shareholders and MKP may be irreparably harmed and
damaged if this Agreement is not specifically enforced. If any dispute shall
arise concerning the sale or disposition of any Stock in violation of any of the
terms of this Agreement, an injunction, temporary or permanent, without bond,
may be issued restraining any such threatened actions pending the determination
of such controversy. Such injunction shall be enforceable in a court of
competent jurisdiction by a decree of specific performance. Such remedy shall,
however, be cumulative and not exclusive and shall be in addition to any of the
other remedies which the parties may have.
16. Anti-Dilution.
16.1 Except as provided in Section 16.2 below, if the Corporation
shall at any time or from time to time change the outstanding common stock as
specified in Section 2 above into a greater number of shares of common stock,
then, upon each such change, the total number of outstanding shares of common
stock issued as specified in Section 2 hereof shall be multiplied by a fraction,
the numerator of which shall be the total number of shares of common stock
outstanding immediately subsequent to such change, and the denominator of which
shall be the total number of shares of common stock as specified in Section 2
hereof. Such additional shares of common stock shall be delivered to the
Shareholders, pro rata to their then stock ownership in the Corporation, without
charge.
16.2 The provisions of Section 16.1 above shall not apply in the
case of a public offering of shares of stock of MKP.
17. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be sent by United States registered or
certified mail, postage prepaid, return receipt requested or by personal
delivery, receipt requested, addressed to a party at the address for such party
first set forth above or at such address or addresses as may be designated by
written notice hereunder. Notices shall be deemed given three (3) business days
after mailing or on the date personal delivery is effected, as the case may be.
18. Waiver. No waiver of any of the provisions of this Agreement shall
be effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed a continuing waiver or waiver in respect of
any subsequent breach or default, whether of similar or different nature, unless
expressly so stated in writing.
19. Modification. This Agreement may not be orally cancelled, changed,
modified or amended, and no cancellation, change, modification or amendment
shall be effective or binding, unless in writing and signed by the party(ies) to
be charged.
20. Severability. If any provision of this Agreement is found to be void
or unenforceable by a court of competent jurisdiction, the remaining provisions
of this Agreement shall nevertheless be binding upon the parties with the same
effect as though the void or unenforceable part had been severed and deleted.
10
<PAGE> 11
21. Stricken Words or Phrases. If any words or phrases in this Agreement
shall have been stricken out or otherwise eliminated, whether or not any other
words or phrases have been added, this Agreement shall be construed as if the
words or phrases so stricken out or otherwise eliminated had never appeared in
this Agreement.
22. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to principles of conflict of laws.
23. Entire Agreement. This Agreement, including all other documents
referred to herein which form a part hereof, if any, contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understanding between or among the parties with respect to such subject matter.
24. Future Cooperation. Each party hereto shall cooperate and shall take
such further action and shall execute and deliver such further documents as may
be reasonably requested by any other party in order to carry out the provisions
and purposes of this Agreement.
25. Headings. The section headings contained in this Agreement are for
reference purposes only, and shall not affect the meaning or interpretation of
this Agreement.
26. Number and Gender. All terms and words used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
27. Binding Effect. The provisions of this Agreement shall extend to,
bind and inure to the benefit of each of the parties hereto and her or its
respective heirs, personal representatives, successors and permitted assigns, if
any.
28. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall constitute but one and the same
instrument.
29. Distribution and Allocation of Corporation's Annual Earnings Before
Income Taxes.
29.1 For each fiscal year of the Corporation commencing with the
partial fiscal year ending September 30, 1995, and for any transitional fiscal
period arising as a result of a change in the fiscal year of the Corporation,
the Corporation shall distribute and/or allocate the Corporation's earnings
before income taxes ("EBIT") for such period as follows:
(a) an amount equal to thirty (30%) percent of EBIT for such
fiscal year shall be paid by the Corporation to FPC as a consulting fee as soon
as possible after the end of each fiscal quarter or transitional period of the
Corporation but in no event later than sixty (60) days after the end of each
fiscal quarter or transitional period of the Corporation;
(b) an amount equal to thirty (30%) percent of EBIT for such
fiscal year shall be allocated to the Corporation's annual incentive bonus pool
(the "Bonus Pool") for such period if and to the extent such allocation is
feasible given the Corporation's then available cash position
11
<PAGE> 12
and projected cash flow requirements, which determination shall be made by the
Corporation's Board of Directors based upon the joint recommendation of Susan
and Hillary in the exercise of their reasonable business judgment;
(c) the balance of EBIT for such fiscal year shall be allocated
for use as general working capital of the Corporation.
30. Restated and Amended Agreement. This Agreement has been restated and
amended as of October 1, 1998 to incorporate the provisions of the Revised and
Restated First Amendment to Shareholders Agreement dated as of September 11,
1997 and the Second Amendment to Shareholders Agreement dated as of October 1,
1998.
In witness whereof, the parties have executed this Agreement as of the day and
year first above written.
Michaelson Kelbick Partners Inc.
By: /s/ Susan Michaelson
----------------------------
Susan Michaelson,
President/Treasurer
By: /s/ Hillary Kelbick
----------------------------
Hillary Kelbick,
Vice President/Secretary
Financial Performance Corporation
By: /s/ William F. Finley
----------------------------
William F. Finley, President
/s/ Susan Michaelson
--------------------------------
Susan Michaelson
/s/ Hillary Kelbick
--------------------------------
Hillary Kelbick
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,456,266
<SECURITIES> 0
<RECEIVABLES> 3,238,363
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,812,856
<PP&E> 601,682
<DEPRECIATION> 152,388
<TOTAL-ASSETS> 8,064,256
<CURRENT-LIABILITIES> 3,040,288
<BONDS> 0
0
0
<COMMON> 94,215
<OTHER-SE> 4,041,707
<TOTAL-LIABILITY-AND-EQUITY> 8,064,256
<SALES> 16,273,508
<TOTAL-REVENUES> 16,273,508
<CGS> 12,222,532
<TOTAL-COSTS> 12,222,532
<OTHER-EXPENSES> 1,234,473
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,239,653
<INCOME-TAX> 147,850
<INCOME-CONTINUING> 2,091,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,091,803
<EPS-PRIMARY> 0.238
<EPS-DILUTED> 0.238
</TABLE>
