FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 0-15539
RIGHT MANAGEMENT CONSULTANTS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2153729
(State of other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
1818 Market Street, Philadelphia, Pennsylvania 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 988-1588
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 April 30, 1996:
Common Stock, $0.01 par value 4,166,723
Class Number of Shares
<PAGE>
Right Management Consultants, Inc.
Consolidated Balance Sheets
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 10,100 $ 8,965
Accounts receivable, trade, net of allowance for
doubtful accounts of $728 and $754 21,909 16,918
Royalties and fees receivable from Affiliates 5,615 4,303
Note receivable 233 233
Prepaid expenses 1,659 1,360
Deferred income taxes 439 600
-------- --------
Total current assets 39,955 32,379
-------- --------
Property and equipment, less accumulated depreciation of
$10,779 and $9,518 8,182 7,447
-------- --------
Other Assets:
Intangible assets, less accumulated amortization of $7,093
and $6,657 20,261 17,824
Deferred income taxes 1,392 1,221
Note receivable 137 146
Other 1,308 1,214
-------- --------
23,098 20,405
-------- --------
Total Assets $ 71,235 $ 60,231
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Line of credit $ 1,325 $ 1,325
Current portion of long-term debt and other obligations 6,695 2,227
Accounts payable 3,970 3,643
Commissions payable 2,064 2,735
Accrued incentive compensation and benefits 2,156 3,543
Accrued redundancy costs 119 115
Other accrued expenses 6,109 2,222
Deferred income 6,125 3,435
-------- --------
Total current liabilities 28,563 19,245
Long-term debt and other obligations 4,022 5,741
-------- --------
Deferred compensation 1,741 1,619
-------- --------
Commitments and Contingent Liabilities (Note F)
Stockholders' Equity:
Preferred stock, no par value; 1,000,000 shares authorized; no
shares issued or outstanding
Common stock, $.01 par value; 20,000,000 shares authorized;
4,403,175 and 4,313,816 shares issued 44 43
Additional paid-in capital 8,526 7,655
Retained earnings 29,049 26,636
Cumulative translation adjustment (193) (191)
-------- --------
37,426 34,143
Less treasury stock, at cost, 252,952 shares (517) (517)
-------- --------
36,909 33,626
-------- --------
Total Liabilities and Stockholders' Equity $ 71,235 $ 60,231
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three months ended
March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue:
Company Office revenue $ 31,208 $ 26,279
Affiliate royalties 1,247 1,125
-------- --------
Total revenue 32,455 27,404
Costs and expenses:
Consultants' compensation 10,931 9,490
Company Office sales and consulting support 2,487 2,085
Company Office administration 11,165 9,678
General sales, consulting and administration 3,856 3,204
-------- --------
28,439 24,457
-------- --------
Income from operations 4,016 2,947
Other income (expense):
Interest income 153 97
Interest expense (172) (195)
-------- --------
(19) (98)
-------- --------
Income before income taxes 3,997 2,849
Provision for income taxes 1,588 1,127
-------- --------
Net income $ 2,409 $ 1,722
======== ========
Earnings per share:
Net income $ 0.55 $ 0.42
======== ========
Weighted average number of shares outstanding 4,417 4,098
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
Right Management Consultants, Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter ended March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Operating Activities:
Net income $ 2,409 $ 1,722
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,155 1,037
Deferred income taxes (10) (410)
Compensation from restricted stock agreements 182 --
Other non-cash charges 92 147
Revenue recognized for assumption of incomplete contracts -- (172)
Provision for doubtful accounts 75 175
Changes in operating accounts:
Accounts receivable, trade and from Affiliates (5,125) (5,828)
Prepaid expenses and other assets (324) (374)
Accounts payable and accrued expenses 2,176 (3,113)
Commissions payable (668) 357
Deferred income 2,264 2,089
-------- --------
Net cash provided by operating activities 2,226 (4,370)
Investing Activities:
Purchase of property and equipment (1,003) (667)
Net cash paid for acquisitions -- (1,108)
-------- --------
Net cash utilized by investing activities (1,003) (1,775)
Financing Activities:
Payment of long-term debt and other obligations (786) (562)
Proceeds from stock issuances 690 72
-------- --------
Net cash utilized by financing activities (96) (490)
Effect of exchange rate changes on cash and
cash equivalents 8 57
-------- --------
Increase (decrease) in cash and cash equivalents 1,135 (6,578)
Cash and cash equivalents, beginning of year 8,965 9,156
-------- --------
Cash and cash equivalents, end of period $ 10,100 $ 2,578
======== ========
Supplemental Disclosures of Cash Flow Information
Cash paid for:
Interest $ 82 $ 108
======== ========
Income taxes $ 1,123 $ 809
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information and
footnote disclosures necessary for a fair presentation of consolidated financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. Certain amounts have been
reclassified in the 1995 Consolidated Statement of Income to conform with the
1996 presentation. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1995.
Principles of Consolidation
The consolidated financial statements include the accounts of Right
Management Consultants, Inc., and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
Currency Translation
There are no material transaction gains or losses in the accompanying
consolidated financial statements.
NOTE B - ACQUISITIONS
In early April 1996, the Company acquired the outstanding stock of People
Tech Consulting, Inc. ("People Tech"), headquartered in Toronto, Canada,
effective March 1, 1996. The accompanying consolidated financial statements
reflect the March operating results and restructuring charges related to People
Tech.
The aggregate purchase price of the acquisition was approximately
$2,950,000, including the costs of acquisition. The purchase price exceeded the
fair value of the assets acquired by approximately $2,750,000.
In connection with this acquisition, the Company utilized 4.0 million
Canadian dollars (or approximately $2.9 million) from its line of credit at the
floating primary rate of the bank.
5
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - DEBT
The current portion of long term debt and other obligations, including the
acquisition debt, relates to increased maturity for existing debt and
approximately $3,608,000 in connection with the People Tech acquisition.
NOTE D - OTHER ACCRUED EXPENSES
The increase in other accrued expenses relates primarily to the Company's
payroll disbursed in April 1996 and restructuring reserves in connection with
the acquisition of People Tech.
NOTE E - GEOGRAPHIC SEGMENTS
Summarized operations of each of the Company's geographic segments in the
aggregate as of March 31, 1996 and 1995 and for the three month periods then
ended are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1996 US Canada Europe Total
<S> <C> <C> <C> <C>
Identifiable assets $58,445 $ 7,338 $ 5,452 $71,235
======= ======= ======= =======
Revenue $27,913 $ 1,794 $ 2,748 $32,455
======= ======= ======= =======
Operating income $ 3,626 $ 226 $ 164 $ 4,016
======= ======= ======= =======
Depreciation and
amortization $ 960 $ 86 $ 109 $ 1,155
======= ======= ======= =======
Capital expenditures $ 943 $ 27 $ 33 $ 1,003
======= ======= ======= =======
</TABLE>
6
<PAGE>
RIGHT MANAGEMENT CONSULTANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE E - GEOGRAPHIC SEGMENTS (continued)
<TABLE>
<CAPTION>
(Dollars in Thousands)
1995 US Canada Europe Total
<S> <C> <C> <C> <C>
Identifiable assets $48,352 $ 1,926 $ 3,088 $53,366
======= ======= ======= =======
Revenue $24,541 $ 1,451 $ 1,412 $27,404
======= ======= ======= =======
Operating income (loss) $ 2,747 $ 261 $ (62) $ 2,946
======= ======= ======= =======
Depreciation and
amortization $ 944 $ 47 $ 46 $ 1,037
======= ======= ======= =======
Capital expenditures $ 598 $ 29 $ 40 $ 667
======= ======= ======= =======
</TABLE>
NOTE F- STOCKHOLDERS' EQUITY
Effective January 1, 1996, the Company awarded 19,500 shares of restricted
stock to its Executive Officers, pursuant to its 1993 Stock Incentive Plan.
Approximately $182,000 related to these shares and a 1995 grant, was charged to
general sales, consulting and administration expenses during the first quarter
1996.
Stock options for the three month period ended March 31, 1996 are
summarized as follows:
Outstanding at January 1, 1996 849,689
Granted at $22.75 - $25.50 per share 170,950
Canceled or expired during the period (1,001)
Exercised during the period (69,859)
-------
Outstanding at March 31, 1996 949,779
=======
PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Revenue generated by Company Offices increased 19% or $4,929,000 for the
quarter ended March 31, 1996 over the corresponding quarter in 1995. This
increase was due to revenue growth in existing Company Offices and the
acquisitions made since the first quarter 1995 which included LM&P, the
Company's former Providence Affiliate and People Tech. Revenue generated from
these acquisitions totaled approximately $2,483,000 or approximately 50% of the
total revenue increase. On a same Office basis, Company Office revenue was
$28,725,000 in the first quarter 1996, or a 9% increase over the corresponding
quarter in 1995.
Affiliate royalties increased 11% or $122,000, for the quarter ended March
31, 1996 from the corresponding quarter in 1995. This was due to same office
growth in Affiliate royalties of approximately 18%
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
which resulted primarily from increased market penetration particularly in the
Southeast and North Central regions in the United States, offset by reduced
royalties resulting from the acquisition of the Providence Affiliate. Revenue
from this office is reflected as Company revenue subsequent to the acquisition.
Company Office expenses in the aggregate increased 16% or $3,330,000 for
the quarter ended March 31, 1996. Costs incurred by the Company's newly acquired
Offices accounted for approximately 37% of the increase for the quarter. Company
Office expenses in the aggregate decreased as a percentage of revenue. Aggregate
Company Office margins were 21% for the quarter versus 19% for the same period
last year. This resulted from profitability of LM&P's operations and continued
cost control in existing Company Offices.
General sales, consulting and administration expense increased 20% or
$652,000 for the quarter over the corresponding quarter in 1995. This increase
was primarily due to continued investments made in technology and support,
addition of certain personnel and charges relating to the issuance of restricted
stock (See Note F in the Notes to the Consolidated Financial Statements).
Despite these increases, the total expenses in this category as a percentage of
revenue plus affiliate royalties remained consistent at 12% for the
corresponding quarter in 1995.
Income before income taxes increased 40% to $3,997,000 for the quarter
ended March 31, 1996 over the corresponding quarter in 1995. This increase
resulted principally from the combination of greater Company Office revenue and
improved efficiencies in Company Office administration.
The Company's effective tax rate was approximately 40% for both the quarter
ended March 31, 1996 and 1995.
Capital Resources and Liquidity
The Company has financed its growth primarily through a combination of cash
flow provided by operations and borrowings under its Revolving Credit. Increases
in existing Company Office revenue and generally more effective cost structures
have allowed the Company to achieve its growth in cash flow from operations. The
Company's working capital decreased to $11,392,000 from $13,134,000 at March 31,
1996 and December 31, 1995, respectively. At March 31, 1996 and December 31,
1995, the Company had cash and cash equivalents of $10,100,000 and $8,965,000,
respectively.
Net cash provided (utilized) by operating activities amounted to $2,226,000
and $(4,370,000) for the quarter ended March 31, 1996 and 1995, respectively.
These amounts were primarily generated from net income as well as non-cash
charges such as depreciation and amortization, offset by increases in accounts
receivable, a reflection of continued Company growth.
Net cash utilized by investing activities amounted to $1,003,000 and
$1,775,000 for the quarter ended March 31, 1996 and 1995, respectively. The
Company has strategically made acquisitions and invested in purchases of
equipment and technology to meet the needs of its expanding operations and to
enhance its operating
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
efficiency. In 1996 and 1995 the Company acquired the assets and/or outstanding
stock of four consulting firms for a combination of cash and non-cash items,
including assumption of incomplete consulting contracts, future defined
incentives and other considerations. The Company anticipates that ongoing cash
flow and working capital will be sufficient to fund these incentive payments as
they become due.
Net cash utilized by financing activities amounted to $96,000 and $490,000
for the quarter ended March 31, 1996 and 1995, respectively. These amounts
represent payments of the Company's borrowings and defined incentives for
acquisitions made in previous years, as discussed above, which were in excess of
proceeds from stock issuances.
In addition to cash flow provided by operations, the Company has borrowing
facilities to provide for increased working capital needs as well as to make
funds available for future acquisition opportunities. The Company's total
borrowing capacity aggregates $10,000,000 through its Revolving Credit Agreement
with its primary bank. During 1996, the Company completed the acquisitions of
People Tech, utilizing 4.0 million Canadian dollars (approximately $2.9 million)
from its revolving credit facility at the floating primary rate of the bank, all
of which remains outstanding at March 31, 1996.
The Company anticipates that its cash and working capital will be
sufficient to service its existing debt and maintain Company operations at
current levels for the foreseeable future. The Company will continue to consider
expansion opportunities as they arise, although the economics, strategic
implications and other circumstances justifying the expansion will be key
factors in determining the amount and type of resources the Company will devote
to further expansion.
9
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, 3, and 5 were not applicable in the period ended March 31, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 9, 1996. At
the meeting, ten of the nominees for the election of directors, being
Frank P. Louchheim, Richard J. Pinola, Joseph T. Smith, Larry A.
Evans, Nancy N. Geffner, John R. Bourbeau, Raymond B. Langton, Rebecca
J. Maddox, Catherine Y. Selleck and Marti D. Smye were elected as
directors. The amendment of the Right Management Consultants, Inc.
1993 Stock Incentive Plan, the adoption of the Right Management
Consultants, Inc. 1996 Employee Stock Purchase Plan, and the
ratification of the selection by the Board of Directors of Arthur
Andersen LLP as the Company's independent public accountants for the
current fiscal year were all approved.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
10.27 - Purchase Agreement between PTR Right Acquisition Co. Inc.
and Marti Smye, Margaret Smith, Richard Zuliani, Margaret Smith
Family Trust, Richard Zuliani Family Trust and People Tech
Consulting, Inc., dated April 10, 1996.
11 - Consolidated Earnings per Share Calculation
27 - Financial Data Schedule *
b. No reports on Form 8-K were filed during the period for which
this Report is filed.
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.
RIGHT MANAGEMENT CONSULTANTS, INC.
BY:\S\ RICHARD J. PINOLA May 14, 1996
--------------------- ------------
Richard J. Pinola Date
Chairman of the Board and
Chief Executive Officer
BY:\S\ G. LEE BOHS May 14, 1996
----------------------------- ------------
G. Lee Bohs Date
Chief Financial Officer and
Principal Accounting Officer
* - Filed in electronic form only.
10
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, is made and entered into this 10th day of
April 1996 by, between and among, PTR Right Acquisition Co. Inc., a federal
Canadian corporation ("Buyer"), Marti Smye ("Smye"), Margaret Smith ("Smith"),
Richard Zuliani ("Zuliani"), Margaret Smith Family Trust ("Smith Trust"),
Richard Zuliani Family Trust ("Zuliani Trust") and People Tech Consulting Inc.,
a federal Canadian corporation ("Corporation"). Smye, Smith and Zuliani are
together referred to herein as "Principals". Principals, Smith Trust and Zuliani
Trust are together referred to herein as "Sellers". Except where the context
requires a different interpretation, "Corporation" applies herein to both
Corporation and its wholly-owned subsidiary, People Tech Consulting Corporation,
a Delaware corporation ("PTCC").
BACKGROUND
Corporation is engaged in the business of selling and providing management
consulting services, and especially change management services (the "Business").
The Canadian Corporation has developed and owns certain special processes and
procedures and copyrights which Buyer wishes to acquire.
Buyer is a wholly owned subsidiary of Right Management Consultants, Inc., a
Pennsylvania corporation ("RMC").
Sellers own all of the issued and outstanding capital stock of Corporation
("Stock").
Buyer desires to buy all of the Stock and Sellers desire to sell the Stock
to Buyer pursuant to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Purchase and Sale of the Stock.
At the Closing (hereinafter defined), the following transactions shall
occur in the following order:
(a) Buyer shall purchase from the Sellers other than Smye and the
Sellers other than Smye shall sell and transfer to Buyer all of their Stock,
free and clear of all claims, liens, encumbrances, restrictions, and security
interests of any kind whatsoever.
(b) The Buyer shall make a demand non-interest bearing loan to
Corporation of $2,361,478.
<PAGE>
(c) Corporation shall purchase for cancellation and Smye shall sell
and transfer to Corporation all of Smye's common shares, free and clear of all
claims, liens, encumbrances, restrictions, and security interests of any kind
whatsoever.
(d) Buyer shall purchase from Smye and Smye shall sell and transfer to
Buyer 14,700 of Smye's Class A Special shares, free and clear of all claims,
liens, encumbrances, restrictions, and security interests of any kind
whatsoever.
(e) Corporation shall redeem 6,300 of Smye's Class A Special shares
(which together with the Class A Special shares described in Section 1.1(d)
constitute all of Smye's Class A Special shares), free and clear of all claims,
liens, encumbrances, restrictions, and security interests of any kind
whatsoever.
2. Cash at Closing.
At the Closing, Buyer shall pay C$153,000 to Smith, C$153,000 to
Zuliani, C$291,400 to Smith Trust and C$291,400 to Zuliani Trust for their
Stock. Corporation shall then pay C$2,040,169 to Smye for her common shares,
Buyer shall then pay C$749,722 to Smye for her Class A Special shares, and
Corporation shall then pay C$321,309 to Smye for her Class A Special shares. All
such amounts shall be paid by wire transfer or other immediately available
funds.
3. Restrictive Covenants.
(a) Non-Compete. In order to induce Buyer to execute this Agreement,
each Principal hereby covenants and agrees that for three years following the
Closing Date, he/she shall not, directly or indirectly, either for his/her own
account or as a partner or joint venturer, or as an agent for any person other
than Corporation, Buyer or RMC, or as a shareholder (other than as the holder of
five percent (5%) or less of an exchange listed entity), owner or otherwise,
anywhere within the Territory (hereinafter defined): (i) engage in the business
of selling or providing corporate change management consulting services; (ii)
engage in any business in competition with Corporation immediately preceding the
date hereof; (iii) contact or solicit any client or customer of Corporation,
Buyer or RMC on behalf of any competitor of Corporation, Buyer or RMC for the
purpose of providing consulting services to such clients or customers on an
in-house basis; or (iv) solicit or induce any employee of Corporation, Buyer or
RMC to terminate such employee's employment with Corporation, Buyer or RMC. For
the purposes of this paragraph, Territory shall mean the Provinces of Canada and
the states of the United States which constitute the continent of North America.
(b) Non-Disclosure. Each Principal hereby covenants and agrees that,
except to the extent required by law, at all
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<PAGE>
times after the Closing, Principal shall not use for Principal's personal
benefit, or disclose, communicate or divulge to, or use for the direct or
indirect benefit of any person, firm, association or company other than
Corporation, Buyer or RMC, any confidential information regarding the business
methods, business policies, procedures, techniques, research or development
projects or results not in the public domain; trade secrets or other knowledge
or processes used or developed by Corporation, Buyer or RMC in or for the
Business; or any names or the addresses of any customers or clients of
Corporation, Buyer or RMC; any non-public data on or relating to past, present
or prospective customers or clients of Corporation, Buyer or RMC; or any other
confidential information relating to or dealing with the business operations or
activities of Corporation, Buyer or RMC (collectively, "Confidential
Information"). Provided, however, that Confidential Information does not include
any information that (x) is, was, or becomes available to Principals on a
nonconfidential basis; (y) has been or is made available on an unrestricted
basis to a third party by Buyer or RMC, by an individual authorized to do so; or
(z) is known by a Principal prior to its disclosure to Principal. Furthermore,
each Principal is specifically permitted to use and disclose Confidential
Information to the extent necessary to assert any right or defend against any
claim arising under this Agreement or pertaining to Confidential Information or
its use, to the extent necessary to comply with any applicable statute,
constitution, treaty, rule, regulation, ordinance or order of the United States,
Canada or any other jurisdiction applicable to such Principal, or if a Principal
receives a request to disclose any Confidential Information under the terms of a
subpoena, order, civil investigative demand, or similar process issued by a
Court of competent jurisdiction or by governmental body or agency of the United
States or Canada or any subdivision thereof.
(c) Remedies. Each Principal acknowledges that the restrictions
contained in this Section 3, in view of the nature of the business in which
Corporation, Buyer and RMC will be engaged, and the transactions taking place
under this Agreement, are reasonable and necessary in order to protect the
legitimate interests of Corporation, Buyer and RMC, and that any violation
thereof would result in irreparable injuries to Corporation, Buyer or RMC. Each
Principal therefore acknowledges that, in the event of a violation of any of
these restrictions, Corporation, Buyer or RMC shall be entitled to obtain from
any court of competent jurisdiction, emergency, preliminary and permanent
injunctive relief from the person violating such restrictions as well as damages
and an accounting of all earnings, profits and other benefits from such person
arising from such violation, which rights will be cumulative and in addition to
any other rights or remedies to which Corporation, Buyer or RMC may be entitled
from such person.
(d) If for any reason any paragraph or portion of a paragraph from
this Section 3 shall be invalid or unenforceable,
-3-
<PAGE>
it is agreed that the same shall not affect any other paragraph or portion
hereof, but the remaining covenants and restrictions or portions hereof shall
remain in full force and effect; and that if such invalidity or enforceability
is due to the unreasonableness of the time or geographical area covered by the
said covenants and restrictions, said covenants and restrictions of this
Agreement shall nevertheless be effective for such period of time and for such
area as may be determined to be reasonable by a court of competent jurisdiction.
4. Closing; Effective Date.
The closing under this Agreement (the "Closing") will take place on
April 10, 1996 (the "Closing Date") at the offices of RMC, or at such other time
or place as the parties shall mutually agree, but no later than April 10, 1996.
The date for which financial reporting and accounting for results of operations
shall commence is March 1, 1996.
5. Representations and Warranties of Principals. Principals hereby jointly
and severally, and unconditionally, represent and warrant to Buyer that:
(a) Authority; Ownership. The Sellers are the sole legal and
beneficial owners of the Stock, and have good and marketable title to the Stock,
free and clear of all claims, liens, encumbrances, restrictions, and security
interests of any kind whatsoever. The authorized capital of Corporation consists
of 27,000 Class A Special shares and 27,000 common shares. The Stock is the only
issued and outstanding shares in the capital of Corporation and the Stock has
been duly authorized and validly issued and is outstanding as fully paid and
non-assessable. There are no outstanding options or agreements under which any
person or entity has the right, present or future, to acquire any shares of
Corporation's Stock or any rights therein. The Sellers have the full right,
personal power and authority to sell and transfer the Stock as provided herein,
without the necessity of obtaining the consent or permission of any third party.
(b) Corporate Organization; Authority. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of Canada, and has the power and authority to own and use its assets and to
carry on its business as it is now conducted, including without limitation
having made, and kept up to date, all appropriate corporate filings in the
Province of Ontario. The execution, delivery and performance of this Agreement
will not contravene or violate or constitute a breach of the terms of the
Corporation's Articles of Incorporation, By-laws or any agreement to which it is
a party.
(c) Subsidiaries. PTCC is a wholly-owned subsidiary of Corporation,
and along with People Tech Management Consultants Limited, a federal Canadian
corporation ("PTMCL"), and People Tech Publishing Inc., an Ontario corporation
("PTPI") (neither of
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<PAGE>
which PTMCL and PTPI have ever been active or engaged in business) comprise all
of the wholly-owned subsidiaries of Corporation. PTCC is a corporation duly
organized and validly existing under the laws of Delaware, has the power and
authority, as conferred on it by its Canadian parent, to own and use its assets
and to carry on the portion of the Business it is now conducting and is
qualified to do business in each jurisdiction wherein the conduct of the
Business makes such qualification necessary. The parties acknowledge that the
value of the shares of PTCC represents less than 10% of the aggregate gross fair
value of the assets of the Canadian Corporation. The execution, delivery and
performance of this Agreement will not contravene or violate or constitute a
breach of the terms of PTCC's, PTMCL's or PTPI's Articles of Incorporation,
By-Laws or any agreement to which it is a party. The Corporation has a
Twenty-five percent (25%) ownership interest in ProTransitions, Inc. ("ProT").
Other than PTCC, PTMCL, PTPI and ProT, Corporation has no investment or interest
in any corporation, partnership, joint venture or other entity.
(d) Binding Obligation. This Agreement has been duly executed and
delivered by each Seller and constitutes the legal, valid and binding
obligations of each of them in accordance with its terms. The execution,
delivery and performance of the Agreement will not conflict with, result in a
breach of, or entitle any party to terminate or call a default with respect to
any contract, instrument, judgment, order, decree, law, rule or regulation
applicable to any of the Sellers or by which any of them is bound.
(e) Consents. No consent of any party to any contract or arrangement
to which any of the Sellers is a party or by which any of them is bound or to
which the Business is subject is required for the execution, consummation or
performance of this Agreement. To the knowledge of Principals, no authorization,
approval or consent of, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with the
execution, delivery or performance of this Agreement by any of the Sellers.
(f) Litigation. Except as otherwise disclosed in this Agreement or the
attachments thereto, there are no actions, suits, proceedings, orders,
investigations, or claims pending or, to the knowledge of the Principals,
threatened, against or relating to any of the Sellers, the Business, or the
Corporation, or that would affect this Agreement, or, if adversely determined,
could have a material adverse affect on the Corporation, or the Business, at law
or in equity, or before or by any national, provincial, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and to the knowledge of the Principals there is no
reasonable basis for any of the foregoing.
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(g) Taxes. Except as disclosed on Schedule 5(g), the Corporation has
properly prepared and duly filed all Tax (hereinafter defined) returns or
reports required to be filed by it in a timely manner and all such returns and
reports properly and accurately reflect the Tax payable by the Corporation for
the periods covered thereby. Except as disclosed on Schedule 5(g), the
Corporation has paid in full when due all Tax payable (including payments
required to be made by installment) by the Corporation at any time prior to the
date of this Agreement and proper provision has been made by the Corporation in
its Financial Statements (hereinafter defined) for Tax payable for periods prior
to the Effective Date with respect to which Tax returns or reports are not yet
required to be filed. There are no agreements, waivers or other arrangements,
including for any extension of time, with respect to the filing of any Tax
payment of any governmental charge, penalty, interest or fine by the Corporation
with respect to the issuance of any Tax assessment or reassessment. There are no
actions, suits, proceedings, investigations or claims now pending, or to the
knowledge of Principals threatened or contemplated against the Corporation in
respect of any Tax, governmental charges, assessments or reassessments or any
matters under discussion with any governmental authority relating to any Tax,
governmental charges, assessments or reassessments or any claims for additional
taxes, governmental charges, assessments or reassessments asserted by any such
authority. The normal reassessment period (within the meaning of the Income Tax
Act (Canada)("ITA")) has expired for the Canadian Corporation taxation year
ended March 31, 1991, and all prior taxation years and there are no audits or
appeals pending in respect of taxation years after March 31, 1991. There are no
audits or appeals pending with respect to PTCC's tax returns. The Corporation
has withheld all amounts required by law to be withheld from payments made by it
and has remitted such amounts to the appropriate authorities within the times
required by law. Except as disclosed on Schedule 5(g), no elections have been
filed after 1971 or are proposed to be filed under the ITA or under the
comparable sections of any similar provincial legislation with respect to the
Corporation. The Corporation does not have any non-capital losses or net capital
losses, as those terms are defined in the ITA and under the ITA, except as
disclosed on Schedule 5(g), will not have any non-capital losses or net capital
losses arising for the taxation year which will be deemed to end immediately
prior to the Closing Date and will not be required to write-down any of its
respective depreciable properties, capital properties (other than depreciable
properties) or eligible capital properties, as those terms are defined in the
ITA, or be required to claim a reserve for doubtful debts in the period deemed
to end immediately prior to the Closing Date. For the purposes of this Section
5(g), "Tax" means all income, capital payroll, sales and use, value added,
excise, franchise, goods and services and real property taxes and customs and
excise duties, whether federal (Canadian, or United States), provincial, state
or local (including tax withholdings, employer health taxes, Workers'
Compensation Act assessments and
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penalties and surcharges and Canada Pension Plan and unemployment insurance
premiums, contributions and remittances) and all interest and penalties with
respect to the above amounts.
(h) Books and Records. The books and accounts and other corporate
records of the Corporation relating to the Business are complete and correct in
all material respects, and all material transactions of the Business have been
accurately recorded therein in accordance with Canadian Generally Accepted
Accounting Principles, consistently applied.
(i) Financial Statements. Principals have delivered to Buyer the
financial statements of the Corporation as of and for the years ended March 31,
1995, 1994 and 1993, and for the eleven months ended February 29, 1996, as
adjusted (the "Financial Statements"). The Financial Statements fairly and
accurately present the financial condition of the Corporation as of the dates
thereof and the results of the Corporation's operations for the periods
described therein, in accordance with applicable generally accepted accounting
principles, consistently applied. Since March 31, 1995, the Corporation has
operated the Business only in the ordinary course; there has been no material
and adverse change in the financial condition, results of operation, assets,
business operations or liabilities of the Business or the Corporation. There are
no liabilities of the Business, or of the Corporation, long-term or short-term,
contingent or otherwise, as of the Effective Date, which are not set forth in
the Financial Statements or otherwise disclosed in this Agreement or the
attachments hereto. No liabilities have been incurred since March 31, 1995 other
than in the normal course, except as recorded in the Corporation's books and
records.
(j) Leases. Schedule 5(j) contains a true and complete schedule of all
of the property leases of premises used by the Corporation in the conduct of the
Business, and of all material leases of personal property used in the Business
(collectively, the "Leases"), listing for each of the Leases the name and
address of the lessor, the amount of payments due annually, and a description of
the leased premises or equipment and its location. Each lessee has paid all
amounts due and is not in default under any of the Leases, and to the knowledge
of Principals there exists no condition or event which, with the passage of
time, the giving of notice or both, will constitute a default under any such
Lease. The Leases are the sole leases of interests in real property or personal
property relating to the Business, or the Corporation to which either or both
the Corporation or PTCC is a party. The transactions contemplated by this
agreement may proceed without the consent of any third party lessor; or
Principals have obtained or will use all reasonable efforts to obtain, prior to
the Closing, the necessary consents to permit the transactions to close without
impact on the Leases.
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(k) Compliance with Laws. To the knowledge of the Principals, Corporation
is in compliance in all materials respects with all existing requirements of
federal, provincial, state, local and other laws, regulations and ordinances,
and all existing requirements of all governmental bodies or agencies having
jurisdiction over them and relating to the operation of the Business.
(l) Assets. The Corporation's assets include all material rights and
property (including intellectual property and copyrights owned by the Canadian
Corporation) necessary for the conduct of the Business in the manner it is
currently conducted. All material items of furniture, fixtures, facilities,
equipment, inventory, supplies and other material items of tangible property and
assets which are part of the Corporation's assets as of the Closing Date are in
good operating condition and repair, subject to normal wear and tear, are usable
in the regular and ordinary course of business and conform to all applicable
laws, ordinances, codes, rules and regulations relating to their use and
operation; and all of the assets are free and clear of all liens, claims,
security interests and encumbrances of any kind whatsoever. Within thirty (30)
days after the Closing, the Sellers shall deliver to the Buyer a list of all
material assets of the Corporation as of the Closing Date.
(m) Employee Benefits.
(i) Schedule 5(m) contains an accurate and complete list of each
of the Plans (hereinafter defined) of or affecting the Corporation. Except as
disclosed on Schedule 5(m), there exists no formal plan or commitment, whether
legally binding or not, to create any additional Plan or change any existing
Plan that would affect any employees or their dependent or beneficiaries.
(ii) The Corporation does not have, nor has it ever had, any
pension plans adopted or otherwise in effect;
(iii) The Principals have heretofore delivered to the Purchaser
true and complete copies of each of the following documents: (a) a copy of each
of the Plans,and all amendments thereto; (b) a copy of the most recent
description of each of the Plans that has been provided to employees, and any
and all such other descriptive materials provided to such employees including
employee booklets; and (c) a copy of any advance income tax ruling or related
professional opinion on the tax status of any Plan;
(iv) Except as disclosed on Schedule 5(m), there are no
outstanding complaints, actions, suits, or claims pending or threatened by any
person relating to any of the Plans. No administrator, fiduciary, or agent of
any Plan, nor the Corporation has taken any action, or failed to take any
action, that would subject the Corporation or any other person to any
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liability for any excess Tax or for a breach of any statutory or fiduciary duty
with respect to or in connection with any Plan;
(v) Each of the Plans and the funds established thereunder has
been operated, administered, and invested in all respects in accordance with its
terms and with the requirements of all applicable laws, and all regulations,
rules and policies in relation thereto, and each of the Plans has been duly
registered where required by, and is in good standing under, such laws.
(vi) Except as disclosed on Schedule 5(m), no Plan provides
benefits, including without limitation death or medical benefits, with respect
to employees of the Corporation beyond their retirement or other termination of
service other than coverage mandated by applicable law, death or retirement
benefits under any Plan, deferred compensation benefits accrued as liabilities
on the books of the Corporation, or benefits the cost of which are borne by the
employee or his beneficiary;
(vii) The consummation of the transactions contemplated by this
Agreement will not accelerate the time of payment or vesting under any Plan, or
increase the amount of compensation due any employee of the Corporation;
(viii) No notification is required to be given to any of the
Plans with respect to the consummation of the transactions contemplated by this
Agreement in relation to such Plans;
(ix) No events have occurred or are expected to occur with
respect to any Plan that would cause a change in the cost of providing the
benefits under such Plan or would cause a change in the costs of providing for
other liabilities of such Plan;
(x) The People Tech Partner Plan will be terminated by May 31,
1996, and except as described in Schedule 5(m) hereto no payments are due or
will be due by the Corporation under such Plan, and in no event shall the
liability of the Corporation with respect to the People Tech Partner Plan exceed
$369,116; and
(xi) With respect to the Section 5(m), "Plan" means every bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, health or other medical, life, disability or other
insurance, supplemental unemployment benefit, profit sharing, pension,
supplemental retirement and each other Employee benefit plan, program, agreement
or arrangement, whether written or unwritten, formal or informal, legally
binding or not, maintained or contributed to or required to be contributed to by
a person for the benefit of any Employees or their dependents or beneficiaries,
as well as the compensation practices and policies
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regarding vacations, sick leave, leaves of absence and all perquisites of
employment, other than employee benefit programs mandated by law.
(n) Employment Contracts.
(i) Listed on Schedule 5(n) hereto are all material contracts and
agreements, oral or written, including without limitation, collective bargaining
agreements, (collectively the "Employment Agreements") whereunder the
Corporation has any obligation or arrangement in the nature of an obligation
(other than obligations to make current wage or salary payments terminable on
notice of thirty (30) days or less) to their respective present or former
directors, officers, employees, consultants, dependent or independent
contractors, advisors, agents, sales representatives, dealers or distributors or
their beneficiaries (collectively "Employees"). True and correct copies of all
such Employment Agreements have been made available to the Buyer. Listed on
Schedule 5(n) hereto are all of the Employees of the Corporation and their
current compensation, including all anticipated bonus and incentive payments.
(ii) Listed on Schedule 5(n) is a true and complete copy of the
employees of the Corporation and their respective wages, salaries and benefits.
(iii) Listed on Schedule 5(n) hereto are all plans, contracts,
agreements, commitments, arrangements or obligations, oral or written,
whereunder the Corporation has made any loan or advance to any of its Employees
in excess of $1,000.
(iv) Except as listed in Schedule 5(n), the Corporation has no
liability of any kind to any Employee except for remuneration and benefits
payable to such Employee in the ordinary course.
(v) Except as set forth in Schedule 5(n), the Corporation has
never been sued or, to the knowledge of the Principals, threatened with suit on
grounds of human rights violations of any kind, including without limitation,
discrimination on the basis of age, sex or sexual harassment, with respect to
any Employee.
(vi) Except as disclosed in this Agreement or the attachments
hereto, all obligations of the Corporation, whether arising by operation of law,
contract, past custom or otherwise, for wages, salaries, bonuses, commissions,
vacation and holiday pay, sick leave and other forms of compensation payable to
Employees in respect of the services rendered by any of them have been paid or
adequate accruals therefore have been made in the Corporation's books and
records and in the Financial Statements. All accrued obligations of the
Corporation applicable to Employees, for payments to trusts or other funds or
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to any governmental agency, with respect to unemployment insurance or other
compensation benefits, workers' compensation, employer health tax, Canada
Pension Plan or social security benefits, and any United States tax withholding
obligations with respect to employment of said Employees through the date hereof
have been paid or adequate accruals therefor have been made on the Corporation's
books and records and in the Financial Statements.
(vii) Except as listed on Schedule 5(n) hereto, (a) the
Corporation is not a party to any collective agreement, contract, commitment or
arrangement, either directly or by operation of law, with any trade union,
association which might qualify as a trade union or any other representative of
employees or dependent contractors; (b) no trade union, association which might
qualify as a trade union or other representative of Employees has been certified
as bargaining agent for Employees or dependent contractors of the Corporation;
and (c) the relations of the Corporation with its respective Employees, whether
organized or not, are not out of the ordinary in a material way. There is no
pending, or progressing or, to the knowledge of the Corporation, threatened
labor or employment dispute, complaint, grievance, arbitration proceeding,
prosecution, request for union representation, union organizing activity or
strike or any other occurrence, event or condition or similar character,
involving the Employees or dependent contractors of the Corporation which is
likely to have material consequences to the Corporation. The Principals do not
know of any occurrence or any events which could rise to any such labor dispute,
complaint, grievance, arbitration proceeding, prosecution, request for union
representation, organizing activity or strike likely to have material
consequences to the Corporation.
(o) Consulting Contracts. Schedule 5(o) contains a list of all of the
Business' material active consulting contracts (written or oral), which list
will be updated in full by Corporation on the Closing Date. All consulting
contracts are in good standing, and the Corporation is not in default or breach
of, and to the knowledge of Principals there exists no event or state of facts
which, after the giving of notice, the passage of time or both, would constitute
a default or breach under, any of the consulting contracts. Corporation has not
transferred, assigned or granted any interest in or agreed to transfer, assign
or grant any interest in any of the consulting contracts to any party. None of
the Principals are aware of any fact, event or circumstance that would cause a
disruption in the Corporation's relations or business prospects with any of its
clients.
(p) Trade Names, Trademarks, Etc. Schedule 5(p) contains a complete
list of all fictitious names, corporate names, trade names, trademarks, service
marks and business styles, both domestic and foreign, used or held by
Corporation for use by the Business (the "Marks). Except as disclosed on
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Schedule 5(p), to the knowledge of Principals, the Marks do not infringe upon
the fictitious names, corporate names, trade names, trademarks, service marks,
business styles or other proprietary rights or property of any other party, no
other party is infringing upon the Marks, and no such infringement has been
alleged, either by or against Corporation. Principals will not, from and after
the Closing Date, collectively or individually, use any of the Marks, or any
names similar thereto, except as an employee of Corporation, Buyer or RMC.
(q) Insurance Policies. Schedule 5(q) contains a schedule of all
insurance policies owned or maintained by Corporation insuring or relating to
the Corporation or the Business. Said list includes policy numbers, identity of
insurers, and a brief description of the nature of insurance included in each
such policy. All said insurance policies are in full force and effect, and all
premiums thereunder have been paid through the date indicated on the Schedule.
Corporation will continue to maintain such insurance coverage or equivalent
replacement coverage in full force and effect through the Closing Date, which
coverage will continue for at least three years after the Closing Date on their
respective current terms.
(r) Residency. Except for Zuliani, none of the Principals is a
non-resident of Canada within the meaning of that term contained in the ITA.
Zuliani, but not the other Principals, hereby represents and warrants that
Zuliani shall provide the Buyer, on or before Closing, subject to Section
8(d)(i), with a certificate (a "Section 116 certificate") having a certificate
limit equal to C$153,000 ("Zuliani's Purchase Price) and issued by Revenue
Canada, Customs, Excise and Taxation ("Revenue Canada") pursuant to Section 116
of the ITA.
(s) Shareholders' Agreement. The Sellers have terminated the
Shareholders Agreement dated as of October, 1994 by and among the Sellers, and
waive any rights they may have had thereunder or pursuant thereto.
(t) No Misrepresentations. No statement made by Principals in any
representation, warranty or covenant made by Principals to Buyer in this
Agreement, or in any other document furnished by Principals to Buyer in
connection with the transaction contemplated hereby (but not including any
forecasts or projections), contains any untrue statement of material fact, or
omits to state a material fact required to be stated to make such statement, in
light of the circumstances in which such statement was made, not misleading. Any
forecasts or projections provided to Buyer are based on assumptions considered
reasonable in the industry and/or disclosed to Buyer.
6. Representations and Warranties of Buyer. Buyer hereby unconditionally
represents and warrants to Sellers as follows:
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(a) Corporate Organization; Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Canada, and
has the power and authority to purchase and own the Stock and conduct the
Business. Buyer has the full corporate power, right and authority to make,
execute, deliver and perform this Agreement, and to take all steps and to do all
things necessary and appropriate to consummate the transactions contemplated
herein. The execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of Buyer and will not
contravene or violate or constitute a breach of the terms of Buyer's Articles of
Incorporation or By-laws.
(b) Binding Obligation. This Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer in accordance with its terms. The execution, delivery and performance of
the Agreement will not conflict with, result in a breach of, or entitle any
party to terminate or call a default with respect to any contract, instrument,
judgment, order, decree, law, rule or regulation applicable to Buyer or by which
Buyer is bound.
(c) Consents. No consent of any party to any contract or arrangement
to which Buyer is a party or by which it is bound or to which the Business is
subject is required for the execution, consummation or performance of this
Agreement. No authorization, approval or consent of, and no registration or
filing with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery or performance of this
Agreement by Buyer, except for a filing required pursuant to the Investment
Canada Act within thirty (30) days after the Closing.
(d) Litigation. There are no actions, suits, proceedings, orders,
investigations, or claims pending or threatened, against or relating to Buyer
that would affect this Agreement, or, if adversely determined, could have a
material adverse affect on Buyer, at law or in equity, or before or by any
national, provincial, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, and there is no
basis for any of the foregoing.
(e) No Misrepresentations. No statement made by Buyer in any
representation, warranty or covenant made by Buyer to Principals in this
Agreement, or in any other document furnished by Buyer to any Principal in
connection with the transactions contemplated hereby (but not including any
forecasts or projections), contains any untrue statement of material fact, or
omits to state a material fact required to be stated to make such statement, in
light of the circumstances in which such statement was made, not misleading. Any
forecasts or projections provided to Buyer are based on assumptions considered
reasonable in the industry and/or disclosed to Principals.
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7. Conditions to Obligation of Buyer. Buyer's obligation to consummate the
transaction contemplated by this Agreement is subject to the satisfaction and
fulfillment at or before the date of Closing of each of the following
conditions:
(a) No Bankruptcy. As of the Closing Date: (i) no creditors of any of
the Sellers shall have filed a petition seeking the entry of a decree or order
for relief under bankruptcy or insolvency or similar laws or for liquidation or
reorganization of the Corporation, or the appointment of a receiver, liquidator,
assignee, custodian, trustee, or similar official for or affecting any of the
Principals or the Stock; (ii) Sellers shall not have commenced a voluntary case
under bankruptcy laws or insolvency or similar laws; and (iii) none of the
Sellers shall have consented to the appointment or taking possession by a
receiver, liquidator, assignee, trustee, custodian or similar official for or
affecting such Seller or the Stock.
(d) Continued Employment of Consultants. At least 10 of the
consultants now employed by Corporation and listed on Schedule 7(d) shall have
agreed to continued employment on their existing terms or other terms reasonably
satisfactory to Buyer, including provisions concerning non-competition.
(e) Key Person Insurance. Corporation shall have obtained, or shall
have begun the process of obtaining, key person insurance on the lives of
Principals in an amount of not less than C$450,000 each.
(f) People Tech Partners. Corporation will terminate its People Tech
Partners compensation plan by May 31, 1996, and all payments due under the plan
for any periods through the Closing Date shall have been paid to or provided for
with respect to any person entitled to payment. Except as described in Schedule
5(m) hereto, no further payments shall be payable to any person under the plan
after the Closing Date.
(g) Deliveries. Sellers shall have delivered to Buyer the following:
(i) Certificates representing the Stock, together with duly
executed stock transfer powers in favor of Buyer or such other endorsements,
assignments or other good and sufficient instruments of sale, transfer and
assignment, in form and substance satisfactory to Buyer, as may be necessary, in
Buyer's reasonable judgment, to transfer to Buyer good and marketable title to
the Stock free and clear of all liens, claims security interests and
encumbrances whatsoever.
(ii) Except as otherwise provided in this Agreement or the
attachments hereto, resignations from all
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officers and directors of the Corporation effective as of the Closing Date.
(iii) Releases executed by each Seller waiving any claims he may
have against Corporation.
(iv) Certified copy of each Corporation's Articles of
Incorporation and By-Laws and a Certificate of Status or Certificate of
Compliance, as the case may be, for each Corporation.
(v) To the knowledge of Principals after review of relevant
records of Corporation, a complete list of all clients to whom the Corporation
has made sales since April 1, 1994, containing such other information and in
such form as Buyer shall reasonably request prior to the Closing. Within thirty
(30) days after the Closing, Principals shall deliver to Buyer a list of the
person who is the primary contact at each client of Corporation.
(vi) The Employment Agreements between Corporation, on the one
hand, and each Principal, on the other hand, dated the Closing Date (the
"Employment Agreements") executed by the Principals. The forms of Employment
Agreements are attached hereto as Exhibits A, B and C.
(vii) A favorable opinion, dated as of the date of Closing, of
Milrad & Agnew, Canadian counsel to Sellers and the Corporation and/or Roberts &
Holland LLP, Special Counsel to Sellers, in form and substance satisfactory to
counsel for Buyer to the effect that:
a. Each of the Corporation and PTCC is a corporation
amalgamated or incorporated, as the case may be, under the laws of the
jurisdiction of its amalgamation or incorporation, as the case may be, and has
not been dissolved.
b. Each of the Corporation and PTCC is qualified to do
business in each jurisdiction wherein the conduct of the Business makes such
qualification necessary.
c. Each of the Sellers and the Corporation has the full
personal right, power and authority or corporate power and authority, as the
case may be, to execute, deliver and perform this Agreement and, as applicable,
the Employment Agreements and to consummate the transactions contemplated
hereby, and
d. This Agreement and each Employment Agreement, as
applicable, has been duly executed and delivered by Sellers and the Corporation,
and constitutes the legal, valid and binding obligation of Sellers and the
Corporation enforceable in accordance with its terms, except as otherwise
qualified or provided in the opinion.
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e. This Agreement has been duly authorized by all necessary
corporate action on the part of the Corporation.
f. The instruments of transfer delivered by Sellers to Buyer
at the Closing are sufficient in form to convey to Buyer all of the Stock.
g. The execution and delivery of this Agreement by the
Sellers and the Corporation do not, and the performance of the terms thereof
will not, to the knowledge of such counsel, contravene any material provision of
existing law of general application or of either Corporation's or PTCC's
Articles of Amalgamation or Articles of Incorporation, as the case may be, or
By-Laws, and to the knowledge of such counsel will not conflict with, result in
a breach of or entitle any party to terminate or call a default under any
judgment or decree applicable to any of the Sellers, or any indenture, mortgage
or other contract or agreement to which any of the Sellers or Corporation is a
party of by which it is bound.
h. No approval, authorization, license, permit or other
action by, or filing with, any federal, provincial, municipal or other
governmental commission, board or agency is required in connection with the
execution and delivery by Sellers of this Agreement, or the consummation of the
transactions contemplated thereby.
i. Such counsel knows of no action, suit, proceeding or
investigation pending or threatened against any of the Principals, the
Corporation, PTCC or the Business, at law or in equity, or before or by any
governmental agency, department commission,board, bureau, agency or
instrumentality, and, to such counsel's knowledge, there is no basis therefor.
8. Conditions to Obligation of Sellers.
Sellers' obligations to consummate the transaction contemplated by
this Agreement is subject to the satisfaction and fulfillment at or before the
date of Closing of each of the following conditions:
(a) No Bankruptcy. As of the Closing Date: (i) no creditors of Buyer
shall have filed a petition seeking the entry of a decree or order for relief
under bankruptcy or insolvency or similar laws or for liquidation or
reorganization of Buyer, or the appointment of a receiver, liquidator, assignee,
custodian, trustee, or similar official for Buyer or any of its property; (ii)
Buyer shall not have commenced a voluntary case under bankruptcy laws or
insolvency or similar laws; and (iii) Buyer shall have consented to the
appointment or taking possession by a receiver, liquidator, assignee, trustee,
custodian or similar official for Buyer or Buyer's property.
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(b) Operating Plan. Buyer, in consultation with Principals, shall have
adopted and delivered an Operating Plan for the Corporation for the period
beginning March 1, 1996, which Operating Plan reflects the prior practice of the
Corporation and RMC's Operating Plan and shall be reasonably satisfactory to
Principals. The Principals acknowledge that Buyer has no plans to expand the
Business except as described in the Operating Plan.
(c) RMC has delivered to Sellers a guarantee, reasonably satisfactory
to Principals, in the form attached as Exhibit D hereto, of Buyer's obligations
under this Agreement and no claim has arisen under such guarantee.
(d) Deliveries. Buyer shall have delivered to Sellers the following:
(i) The payments of the Purchase Price due at Closing as set
forth in Section 2 hereof, less any applicable tax withholding. If Zuliani does
not provide Buyer at the Closing with a Section 116 certificate as represented
in Section 5(r) of this Agreement, Buyer shall escrow one-third of Zuliani's
Purchase Price pursuant to the terms of an Escrow Agreement by and between Buyer
and Zuliani in the form attached hereto as Exhibit E.
(ii) The Employment Agreements executed by Corporation.
(iii) Certified copies of resolutions of the Board of Directors
of Buyer authorizing the execution and delivery of this Agreement and the
performance of the transactions contemplated herein.
(iv) Certified copies of Buyer's Articles of Incorporation and
By-Laws and a Certificate of Compliance of Buyer.
(v) A favorable opinion, dated as of the date of Closing, of
Baker & McKenzie, special counsel to Buyer, and/or Fox, Rothschild, O'Brien &
Frankel, counsel to Buyer, in form and substance satisfactory to counsel for
Principals to the effect that:
a. Buyer is a corporation incorporated under the laws of
Canada and has not been dissolved.
b. Buyer has the full corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby and thereby.
c. This Agreement has been duly authorized by all necessary
corporate action on the part of Buyer and has been duly executed and delivered
by Buyer.
-17-
<PAGE>
d. The execution and delivery of this Agreement does not, and
the performance of the terms thereof will not, contravene any material provision
of existing law of general application or of Buyer's Articles of Amalgamation or
By-laws.
e. No approval, authorization, license, permit or other action
by, or filing with, any federal, provincial, municipal or other governmental
commission, board or agency is required in connection with the execution and
delivery by Buyer of this Agreement, or the consummation of the transactions
contemplated thereby, except for a filing required pursuant to the Investment
Canada Act within thirty (30) days after the Closing.
f. After having made inquiries of each lawyer in the Toronto
office of Baker & McKenzie only, such counsel knows of no action, suit,
proceeding or investigation pending or threatened against Buyer, at law or in
equity, or before or by any governmental agency, department commission, board,
bureau, agency or instrumentality, and, to such counsel's knowledge, there is no
basis therefor.
9. Buyer's Post-Closing Covenants.
On or before May 31, 1996, Buyer will cause the Corporation to pay (i) any
and all amounts due the Principals from the Corporation as indicated on the
Financial Statements or Schedule 5(n), including accrued Shareholder and
management bonuses, and loans payable to Principals, and (ii) any and all
distributions due anyone as People Tech Partners distributions as indicated on
the Financial Statements or Schedule 5(n), upon which time the Principals shall
terminate the PPSA registration made against the assets of the Corporation on
March 29, 1994 (and any other registrations that may exist).
10. Further Assurances.
At Closing and at all times thereafter, Principals shall, upon the request
of Buyer execute all documents, instruments, certifications and further
assurances and take all steps reasonably necessary or appropriate to implement,
confirm or perfect the transactions provided under this Agreement.
11. Indemnification.
(a) Subject to Section 11(f) below, Principals shall jointly and severally
indemnify, hold harmless and defend Buyer (and its officers and directors), from
and against any and all claims, liabilities, direct losses, damages (but not
including consequential damages), costs, and expense, including reasonable
counsel fees and costs incurred in investigation (each of the foregoing being
referred to herein as a "Loss") incurred or suffered by Buyer or Corporation and
not reimbursed by insurance, by reason of: (i) any breach by Principals or
inaccuracy of any
-18-
<PAGE>
of the warranties, representations, covenants or agreements made by Principals
contained in this Agreement; (ii) any and all liabilities and obligations of, or
claims against, Principals not expressly assumed by Buyer hereunder; (iii) any
liability arising in connection with any Tax assessed against Principals; and
(iv) to the extent not disclosed on the Financial Statements or on the Schedules
attached hereto, any and all liabilities and obligations or claims arising out
of, or in connection with, the Business, or the operation of the Corporation's
or PTCC's respective businesses, prior to the Closing.
(b) (i) The purchase and redemption by Corporation of Stock owned by
Smye as described in section 1 of this Agreement (the "Smye Repurchases") will
be made at the sole request of Smye and not at the request of any other person.
Smye shall therefore indemnify, hold harmless and defend Corporation, Buyer, and
any of their respective officers, directors or shareholders (the "Special
Indemnitees") against any Loss incurred by any Special Indemnitee by reason of
being assessed or reassessed pursuant to any federal or provincial taxing
statute (the "Taxing Statutes") in respect of any amounts assessed or reassessed
against Corporation pursuant to any Taxing Statute. For greater certainty and
without limiting the generality of the foregoing, Smye shall indemnify, hold
harmless and defend the Special Indemnitees against any Loss incurred as a
consequence of being assessed or reassessed in respect of any amounts assessed
or reassessed against Corporation with respect to the Smye Repurchases pursuant
to Part VI.1 of the ITA.
(ii) Any payment made by Smye pursuant to this Section 11(b) shall
represent and shall be treated by the parties as a reduction in the price paid
by Corporation to Smye pursuant to section 2 of the Agreement. If the reduction
of the price paid by Corporation reduces Corporation's Part VI.1 tax, Smye shall
not be entitled to any refund of payments made pursuant to this Section 11(b).
(iii) Notwithstanding any other provision in this Agreement, all
indemnification payments pursuant to indemnifications described in this Section
11(b) shall be payable by Smye:
a. where the Loss is an amount for which a Special Indemnitee
has been assessed or reassessed pursuant to a Taxing Statute, forthwith at the
time that the Special Indemnitee notifies Smye in writing of the assessment or
reassessment, and
b. in any other case, forthwith at the time that the Special
Indemnitee notifies Smye in writing that the Special Indemnitee has incurred the
Loss.
(iv) Notwithstanding any other provision in this Agreement, all
indemnifications described in this Section
-19-
<PAGE>
11(b) shall be in addition to the independent of any other indemnifications in
this Agreement, shall not be subject to Section 11(f) of this Agreement and
shall not be limited as to amount or duration.
(v) If Smye has paid Corporation amounts pursuant to this Section
11(b) that are attributable to Corporation's liability for Part VI.1 tax (the
"Part VI.1 Payments") and that are not attributable to any interest, penalties
or other amounts in respect of such assessment or reassessment of Part VI.1 tax,
a. Corporation shall file, on a timely basis, income tax
returns in which it claims a deduction (the "Part VI.1 Deduction") with respect
to such part VI.1 tax pursuant to paragraph 110(1)(k) and, where relevant,
paragraph 111(1)(a) of the ITA, and
b. Corporation shall refund to Smye, at the time that each
income tax is first assessed by Revenue Canada, an amount equal to the amount by
which its Part I tax is reduced as a result of the Part VI.1 Deduction but in no
case shall such refunded amounts exceed the Part VI.1 Payments.
Smye shall have the right to inquire from time to time as to the timely filing
of Corporation's income tax returns and the status of any Part VI.1 Deduction
and Corporation or Buyer shall authorize its financial advisors to discuss same
freely with Smye.
(c) (i) Subject to Section 11(f) below, Buyer shall indemnify, hold
harmless and defend Principals from and against any Loss incurred or suffered by
Principals, by reason of: (i) any breach by Buyer or inaccuracy of any of the
warranties, representations, covenants or agreements made by Buyer contained in
this Agreement; and (ii) any and all liabilities and obligations or claims
arising out of, or in connection with, the operation of the Business, or the
operation of the Corporation's or PTCC's respective businesses by Buyer, after
the Closing.
(ii) In the event of a proposed assessment or reassessment pursuant
to a Taxing Statute in respect of which Smye has agreed to indemnify Special
Indemnitees pursuant to Section 11(b) of this Agreement, the Special Indemnitee
shall give notice thereof to Smye as soon as practicable upon receipt of written
notice thereof from the relevant taxing authority. The Special Indemnitee shall
permit Smye at her option and expense to participate in the discussions and
negotiations with the taxing authority in connection with the proposed
assessment or reassessment; provided that Smye shall participate through counsel
reasonably satisfactory to the Special Indemnitee.
(d) Soon as reasonably practical (but in no event later than twenty
days) after receipt by a party hereto (the
-20-
<PAGE>
"Indemnitee") of notice of any Loss, in respect of which the other party may be
liable under this Section 11, the Indemnitee shall give notice thereof to the
other party obligated to provide indemnification hereunder (the "Indemnifying
Party"). The Indemnitee shall permit the Indemnifying Party, at its option and
expense, to assume the defense of any such claim by counsel reasonably
satisfactory to the Indemnitee and to settle or otherwise dispose of the same,
provided that the Indemnitee may at all times, and at its expense, participate
in such defense, and provided, further, that the Indemnifying Party shall not,
in defense of any such claim, except with the prior written consent of the
Indemnitee, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnitee and its affiliates a release
of all liabilities in respect of such claims, or that does not result only in
the payment of money damages by the Indemnifying Party.
(e) Failure by an Indemnitee to give prompt notice to an Indemnifying
Party specified in Section 11(d) above shall not release, waive or otherwise
affect the Indemnifying Party's obligation to indemnify hereunder except to the
extent that the Indemnifying Party can demonstrate actual loss and prejudice as
a result of such failure.
(f) Notwithstanding any provision of this Section 11 to the contrary
except Section 11(b), there shall be no obligation on the part of the Principals
to indemnify hereunder:
(i) unless aggregate Losses suffered or incurred by an
Indemnitee, net of any insurance proceeds with respect thereto, exceed
US$75,000;
(ii) with respect to any claims made by People Tech, a
Pennsylvania partnership located in Havertown, Pennsylvania, in connection with
the right of the Corporation to use the name "People Tech" (the Principals agree
neither RMC, Buyer nor the Corporation shall be required to expend any sums in
defending any such claims or in acquiring the right to the continued use of the
name "People Tech");
(iii) in the case of Smye, once indemnification payments made
by Smye pursuant to this Section 10 have equalled the amount of Net
Consideration (hereinafter defined) paid to the Principals;
(iv) in the case of Smith, once indemnification payments made
by Smith pursuant to this Section 10 have equalled the amount of Net
Consideration received by Smith and the Smith Trust; or
(v) in the case of Zuliani, once indemnification payments made
by Zuliani pursuant to this Section
-21-
<PAGE>
10 have equalled the amount of Net Consideration received by Zuliani and the
Zuliani Trust.
"Net Consideration" shall mean 55% of the amounts paid pursuant
to Section 2 of this Agreement.
12. Survival of Representations.
All representations and warranties made by the parties herein and
pursuant hereto shall survive the Closing and expire upon the eighteen month
anniversary of the Closing Date unless a claim is brought thereon by Buyer or
Sellers, as the case may be, prior to such eighteen month anniversary, except in
the case of a representation or warranty relating to Tax which shall expire on
the third anniversary of the Closing Date.
13. Expenses; Sales and Transfer Taxes.
The parties hereto shall bear their own respective expenses,
including legal and accounting fees, incident to the preparation and carrying
out of this Agreement. Principals will pay any sales, transfer or privilege
taxes and duties in Ontario, due upon or with respect to the transactions under
this Agreement, if any. Principals shall be personally responsible for any fees
and expenses due Geneva Financial Corporation, Robert Esecson and/or Esmarox
Corporation in connection with the transactions contemplated hereby. Sellers and
Buyer represent and warrant that except as described above, neither has made any
agreement nor taken any action which may cause anyone to become entitled to any
commission as a result of the transactions contemplated hereunder.
14. Miscellaneous.
(a) Notices. All notices, demands and other communications to be
made hereunder ("Notice") shall be given in writing and shall be deemed to have
been duly given if personally delivered or sent by certified or registered mail,
postage prepaid, return receipt requested, to the other party at the following
address (or to such other address as may be given by Notice by any party):
If to Buyer: PTR Right Acquisition Co. Inc.
86 Bloor Street, Suite 304
Toronto, Ontario M5S 1M5
With copies to: Right Management Consultants, Inc.
1818 Market Street, 33rd Floor
Philadelphia, Pennsylvania 19103
Attention: G. Lee Bohs, Executive
Vice President and CFO
-22-
<PAGE>
and
Theodore A. Young, Esquire
Fox, Rothschild, O'Brien & Frankel
2000 Market Street, 10th Floor
Philadelphia, Pennsylvania 19103
If to a Principal: to the address for such
Principal in Buyer's records
With a copy to: Arthur W. Brill, Esquire
Roberts & Holland LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7416
Notice shall be deemed effective, if personally delivered, when delivered, and
if mailed, at midnight on the third business day after deposit in the Canadian
or U.S. mail.
(b) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
(c) Governing Law. This Agreement has been made, executed and
delivered in, and is to be governed, construed and enforced in accordance with
the laws of Ontario, Canada.
(d) Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
(e) Entire Agreement. This Agreement and the documents attached as
exhibits hereto, when executed will contain the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and thereof, and supersede all prior written and oral negotiations,
agreements and writings.
(f) Modification. This Agreement may be amended, superseded,
terminated or extended, and the terms hereof may be waived, only by a written
instrument signed by all of the parties or, in the case of a waiver, signed by
the party waiving compliance.
(g) Preservation of Rights. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any right, power or
privilege,
-23-
<PAGE>
preclude any further exercise thereof or the exercise of any other such right,
power or privilege. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity.
(h) Provisions Severable. The provisions of this Agreement are
independent of and severable from each other. No provisions will be affected or
rendered invalid or unenforceable by virtue of the fact that for any reason any
one or more of any of the provisions hereof may be invalid or unenforceable in
whole or in part.
(i) Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
/s/ Quincey Cotton /s/ Marti Smye
- ----------------------------- ------------------------------
Witness Marti Smye
/s/ Quincey Cotton /s/ Margaret Smith
- ----------------------------- ------------------------------
Witness Margaret Smith
Margaret Smith Family Trust
/s/ Quincey Cotton By: /s/ Margaret Smith
- ----------------------------- --------------------------
Witness
/s/ Quincey Cotton /s/ Richard Zuliani
- ----------------------------- ------------------------------
Witness Richard Zuliani
Richard Zuliani Family Trust
/s/ Quincey Cotton By: /s/ Richard Zuliani
- ----------------------------- ------------------------------
Witness
/s/ Richard Zuliani By: /s/ M. Both
- ----------------------------- --------------------------
Witness
/s/ Richard Zuliani By: /s/ Ted Bodary
- ----------------------------- --------------------------
Witness
PTR Right Acquisition Co., Inc.
By: /s/ G. Lee Bohs
--------------------------
G. Lee Bohs, Secretary
People Tech Consulting Inc.
By: /s/ Marti Smye
--------------------------
Marti Smye
-25-
Right Management Consultants, Inc.
Exhibit 11 - Consolidated Earnings Per Share Calculation
For the Three Months Ended March 31,
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Earnings per common share
Primary and Fully Diluted EPS:
Primary EPS
Net income $2,409,000 $1,722,000
========== ==========
Weighted average number of shares
issued and outstanding 4,095,000 3,963,000
Dilutive effect (excess of number of
shares issuable over number of shares
assumed to be issued using the average
market price during the period) of
outstanding options 322,000 135,000
---------- ----------
Adjusted weighted average number
of shares outstanding 4,417,000 4,098,000
========== ==========
Earnings per common share $ 0.55 $ 0.42
========== ==========
Fully Diluted EPS
Net income $2,409,000 $1,722,000
========== ==========
Weighted average number of shares
issued and outstanding 4,095,000 3,963,000
Dilutive effect (excess of number of
shares issuable over number of shares
assumed to be issued using the market
price at the end of the period) of
outstanding options
361,000 124,000
---------- ----------
Adjusted weighted average number
of shares outstanding 4,456,000 4,087,000
========== ==========
Earnings per common share $ 0.54 $ 0.42
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000802806
<NAME> RIGHT MANAGEMENT CONSULTANTS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,100
<SECURITIES> 0
<RECEIVABLES> 27,894
<ALLOWANCES> 728
<INVENTORY> 0
<CURRENT-ASSETS> 39,955
<PP&E> 18,961
<DEPRECIATION> 7,093
<TOTAL-ASSETS> 71,235
<CURRENT-LIABILITIES> 28,563
<BONDS> 0
0
0
<COMMON> 44
<OTHER-SE> 37,382
<TOTAL-LIABILITY-AND-EQUITY> 71,235
<SALES> 32,455
<TOTAL-REVENUES> 32,455
<CGS> 10,931
<TOTAL-COSTS> 24,583
<OTHER-EXPENSES> 3,856
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 3,997
<INCOME-TAX> 1,588
<INCOME-CONTINUING> 2,409
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,409
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.54
</TABLE>
