<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1996
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
RENAISSANCE SOLUTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3217557
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
LINCOLN NORTH
55 OLD BEDFORD ROAD
LINCOLN, MASSACHUSETTS 01773
(617) 259-8833
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID P. NORTON
RENAISSANCE SOLUTIONS, INC.
LINCOLN NORTH
55 OLD BEDFORD ROAD
LINCOLN, MASSACHUSETTS 01773
(617) 259-8833
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
HAL J. LEIBOWITZ, ESQ. ADAM SONNENSCHEIN, ESQ.
HALE AND DORR FOLEY, HOAG & ELIOT LLP
60 STATE STREET ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02109
(617) 526-6000 (617) 832-1000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date hereof.
---------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] 333-
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] 333-
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.0001 par
value per share . . . 1,265,000 shares $38.125 $48,228,125 $14,615
</TABLE>
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(1) Includes an aggregate of 165,000 shares which the Underwriters have the
option to purchase from the Company to cover over-allotments, if any. See
"Underwriting."
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
as amended, and based on the average of the high and low sales prices of
the Common Stock on the Nasdaq National Market on October 24, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 28, 1996
PROSPECTUS
1,100,000 SHARES
[LOGO]
RENAISSANCE SOLUTIONS, INC.
COMMON STOCK
Of the 1,100,000 shares of Common Stock offered hereby, 50,150 shares are
being sold by the Company and 1,049,850 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders."
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol RENS. On October 24, 1996 the last reported sale price for the Common
Stock was $40.25 per share. See "Price Range of Common Stock."
--------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON
PAGE 5.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS (2)
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<S> <C> <C> <C> <C>
Per Share... $ $ $ $
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Total (3)... $ $ $ $
</TABLE>
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(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses associated with this offering estimated at
$400,000, $303,000 of which will be payable by the Company and $97,000 of
which will be payable by certain Selling Stockholders.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 165,000 additional shares of Common Stock solely to cover over-
allotments, if any. If all such shares are purchased, the total Price to
Public, Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ , respectively. See
"Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996, at the office of the agent of Hambrecht &
Quist LLC in New York, New York.
HAMBRECHT & QUIST
COWEN & COMPANY
ROBERTSON, STEPHENS & COMPANY
, 1996
<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission pursuant to the informational
requirements of the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at
Seven World Trade Center, 13th Floor, New York, New York 10048, and at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, the Company is required to file electronic
versions of these documents with the Commission through the Commission's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The
Commission maintains a World Wide Web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Common Stock of
the Company is traded on the Nasdaq National Market. Reports and other
information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments, exhibits and schedules thereto) on Form S-3
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission, to
which Registration Statement reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Registration Statement and the exhibits thereto may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 29, 1996, June 28, 1996 and September 27, 1996, and the
description of the Common Stock contained in the Company's Registration
Statement on Form 8-A filed by the Company with the Commission on March 27,
1995, are incorporated by reference in this Prospectus. All documents filed by
the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering made hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing of such
documents. Any statement contained herein or in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of the Registration Statement and this Prospectus
to the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
Copies of all documents incorporated by reference herein (other than
exhibits to such documents which are not specifically incorporated by
reference into such documents) may be obtained upon written or oral request
without charge by persons, including beneficial owners, to whom this
Prospectus is delivered. Requests should be made to the Investor Relations
Department of the Company at its executive offices located at Lincoln North,
55 Old Bedford Road, Lincoln, Massachusetts 01773, telephone: (617) 259-8833.
SFS and Strategic Feedback System are trademarks of the Company. All other
trademarks, service marks or trade names referred to in this Prospectus are
the property of their respective owners.
---------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus or incorporated by reference
herein. Unless otherwise indicated, all information contained in this
Prospectus (i) gives effect to completion on April 3, 1995 of the
Reorganization described elsewhere in this Prospectus under "The Company," and
(ii) assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
Renaissance Solutions, Inc. ("Renaissance" or the "Company") provides
management consulting and client/server systems integration services, primarily
for large corporations. The Company's offerings fall into two categories,
strategic services and performance innovation services. Strategic services
consist primarily of management consulting services using the "Balanced
Scorecard" concept described in three Harvard Business Review articles and in
The Balanced Scorecard, a recently published book, all of which were co-
authored by one of the Company's founders, and the design, development and
implementation of software-based executive information systems. The Company's
strategic services are designed to assist senior executives in strategy
implementation. The Company's performance innovation services include the
design, development and implementation of desktop applications using
client/server architecture to support decision-making, coordination,
information sharing and skill development by knowledge workers. These
applications are designed for key business processes, including market and
product development, sales, order fulfillment and customer service. The Company
believes that by bridging management consulting and systems integration
capabilities it can help its customers effectively use technology to satisfy
their strategic objectives.
The Company markets its services directly and, since June 1993, pursuant to a
Teaming Agreement (the "Teaming Agreement") with Gemini Consulting, Inc.
("Gemini"), the sole stockholder of one of the Selling Stockholders (the
"Gemini Selling Stockholder"). The Company and Gemini have entered into a Third
Amended and Restated Teaming Agreement (the "Restated Teaming Agreement") to be
effective upon the closing of this offering. Under the Restated Teaming
Agreement, Renaissance and Gemini will market and perform certain service
offerings on a collaborative basis. Gemini has committed, subject to certain
conditions, to provide the Company with minimum bookings of $12.0 million in
the twelve months ending October 31, 1997, and $12.5 million in each of the
twelve month periods ending October 31, 1998 and 1999. Renaissance markets and
delivers its services through offices in Boston, Chicago, New York and London.
Renaissance customers include AT&T, CIGNA, The Limited, Mercantile & General
and Mobil.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company..... 50,150 shares
Common Stock offered by the Selling
Stockholders........................... 1,049,850 shares
Common Stock to be outstanding after the
offering............................... 7,750,318 shares (1)
Use of proceeds......................... Working capital and other general
corporate purposes, including possible
acquisitions
Nasdaq National Market symbol........... RENS
</TABLE>
- --------------------
(1) Based on the number of shares outstanding as of September 27, 1996, after
giving effect to (i) the exercise by certain Selling Stockholders of
options to purchase a total of 31,250 shares of Common Stock to be sold by
such Selling Stockholders in this offering and (ii) the exercise by the
Gemini Selling Stockholder of warrants to purchase a total of 633,600
shares of Common Stock to be sold by the Gemini Selling Stockholder in this
offering. Excludes (i) 931,504 shares of Common Stock (excluding options to
purchase 31,250 shares of Common Stock which will be exercised and sold in
connection with this offering) issuable upon the exercise of options
outstanding as of September 27, 1996 at a weighted average exercise price
of $14.44 per share, (ii) 38,604 shares of Common Stock reserved for future
option grants and stock awards under the Company's 1995 Equity Incentive
Plan, (iii) 407,858 shares of Common Stock reserved for future stock
purchases under the Company's 1995 Employee Stock Purchase Plan, and (iv)
25,000 shares of Common Stock reserved for future option grants under the
Company's 1995 Director Stock Option Plan. The Board of Directors of the
Company recently approved an amendment to the Company's 1995 Equity
Incentive Plan, subject to stockholder approval, increasing the number of
shares of Common Stock available for issuance thereunder from 1,100,000 to
2,100,000. See "Recent Developments--Proposed Amendment to the Company's
1995 Equity Incentive Plan" and Notes 7 and 8 of Notes to Consolidated
Financial Statements.
3
<PAGE>
SUMMARY OF CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED
PERIOD FROM DECEMBER 31, NINE MONTHS ENDED
MARCH 23, 1992 ------------------------ ---------------------------
(INCEPTION) THROUGH SEPTEMBER 29, SEPTEMBER 27,
DECEMBER 31, 1992 1993 1994 1995 1995 1996
------------------- ------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $1,500 $ 2,540 $12,881 $22,601 $ 15,721 $ 25,395
Income (loss) from
operations............ 220 (1,698) 2,910 5,157 3,259 5,059
Net income (loss) (1).. 214 (1,741) 2,800 3,676 2,470 3,615
PRO FORMA DATA (2):
Pro forma net income
(loss)................ $ 127 $(1,654) $ 2,207 $ 3,340 $ 2,134 $ 3,615
Pro forma net income
per share............. $ .44 $ .56 $ .36 $ .49
Pro forma weighted
average number of
common shares
outstanding (3)....... 4,993 5,913 5,758 7,376
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 27, 1996
--------------------------
ACTUAL AS ADJUSTED(4)
------- --- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities.... $42,149 $54,414
Working capital..................................... 51,537 63,802
Total assets........................................ 56,481 68,746
Stockholders' equity................................ 53,427 65,692
</TABLE>
- --------------------
(1) From its inception in 1992 to its Reorganization in April 1995, the Company
was either an S corporation or a limited partnership and accordingly was
not subject to federal and state income taxes. See "The Company."
(2) The pro forma data have been computed as if the Company were subject to
federal and all applicable state corporate income taxes from its inception
in 1992 to its Reorganization in April 1995, based on the statutory tax
rates and the tax laws then in effect. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Notes 2 and
9 of Notes to Consolidated Financial Statements.
(3) Based on the weighted average number of common shares and common share
equivalents. See Notes 1 and 2 of Notes to Consolidated Financial
Statements.
(4) Adjusted to give effect to (i) the exercise of warrants to purchase 633,600
shares of Common Stock by the Gemini Selling Stockholder and the receipt by
the Company of the proceeds therefrom, (ii) the exercise of options to
purchase 31,250 shares of Common Stock by certain Selling Stockholders and
the receipt by the Company of the proceeds therefrom, and (iii) the sale of
50,150 shares of Common Stock offered by the Company hereby at an assumed
public offering price of $40.25 per share (after deduction of the estimated
underwriting discount and offering expenses payable by the Company). See
"Use of Proceeds."
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
4
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Common Stock offered by this Prospectus.
Dependence on Gemini. Since 1993 the Company has been a party to the Teaming
Agreement with Gemini pursuant to which the Company and Gemini have agreed to
market and perform certain service offerings on a collaborative basis. The
Company currently relies on Gemini for a significant portion of the Company's
marketing activities. Approximately 79%, 54% and 43% of the Company's revenues
in 1994, 1995 and the first three fiscal quarters of 1996, respectively,
resulted from its relationship with Gemini; approximately 65%, 24% and 27%,
respectively, of revenues were from services and other amounts billable to
Gemini and approximately 14%, 30% and 16%, respectively, of revenues were from
services billable directly to third parties. As a result, the Company's
success is currently dependent in large part on the success of Gemini's
marketing efforts.
The Company and Gemini have entered into the Restated Teaming Agreement,
which will become effective upon the closing of this offering. Gemini has
committed to provide the Company with certain minimum bookings during the term
of the Restated Teaming Agreement, subject to the satisfaction of certain
conditions. In the event that during any of the six month periods during the
term of the Restated Teaming Agreement bookings obtained by Renaissance from
Gemini customers or customers of joint service offerings by Renaissance and
Gemini are less than specified minimum commitment levels, Gemini may retain
the services of Renaissance for a fee equal to the amount of the deficiency.
If at the end of twelve months a bookings deficiency still remains, Gemini is
required to make a compensating payment to Renaissance of 25% of the remaining
deficiency in full satisfaction of the bookings deficiency. Gemini's
obligation to provide these bookings to the Company will terminate in the
event that any of Harry M. Lasker, David A. Lubin or David P. Norton, the
founders of the Company, ceases to be employed by the Company on a full time
basis during the term of the Restated Teaming Agreement. In such event, the
parties have agreed to negotiate in good faith to establish new commitments
for the remainder of the term of the Restated Teaming Agreement. In addition,
the amount of Gemini's bookings commitment is subject to adjustment as a
result of, among other things, any failure by Renaissance to make available to
Gemini such quantities of marketing and sales resources and such number of
staff for joint service offerings as may from time to time be mutually agreed
upon by the parties.
The Company monitors Gemini's progress in meeting its bookings commitments
through regular conference calls and meetings with Gemini representatives.
"Bookings" are generally defined for purposes of the Restated Teaming
Agreement as gross fees (excluding expense reimbursements) committed to
Renaissance as a result of the relationship with Gemini during the applicable
period, as evidenced by a written agreement between the Company and the
customer for the delivery of goods or services within twelve months, plus any
such fees actually collected by the Company during such period which are not
evidenced by a written agreement. Gemini generally is treated as having
satisfied its bookings commitment regardless of whether revenues are
recognized by Renaissance with respect to a particular engagement. For
example, under the Restated Teaming Agreement, 50% of the fees attributable to
a cancelled contract count towards Gemini's bookings commitment if such
cancellation is not primarily attributable to the actions or omissions of
Gemini. In accordance with industry practice, nearly all of the Company's
contracts are terminable by either the customer or the Company on short or no
notice and without penalty. In addition, Gemini does not guarantee the
collectibility of any receivables resulting from customer engagements under
the Restated Teaming Agreement.
The Restated Teaming Agreement has a term ending on November 1, 1999. The
Restated Teaming Agreement is subject to earlier termination upon the
occurrence of certain events, including a change in control of the Company (as
defined in the Restated Teaming Agreement). In the event that the Restated
Teaming Agreement is validly terminated by either party prior to its
expiration, Renaissance is required to pay a termination fee to Gemini in an
amount declining from a maximum of $1.6 million in the event of a termination
prior to November 1, 1996 to a minimum of $250,000 in the event of a
termination prior to
5
<PAGE>
November 1, 1999. In addition, in such event, various payment obligations
contained in the Restated Teaming Agreement will terminate on the termination
date. While the Company is continuing to build its internal marketing force
and seeking additional strategic alliances, the termination of the Restated
Teaming Agreement could have a material adverse effect on the Company's
business and results of operations.
Under the Restated Teaming Agreement, the Company has agreed to train Gemini
in the use of the Company's Balanced Scorecard, desktop application and
certain other methodologies during the period ending October 31, 1998 and to
perpetually license these methodologies, to the extent developed prior to
November 1, 1998, to Gemini on a non-exclusive basis. As a result, during the
term of the Restated Teaming Agreement Gemini personnel may perform services
in connection with joint service offerings which might otherwise be performed
by Company personnel. In addition, following the termination of the Restated
Teaming Agreement, Gemini will be in a position to compete with the Company
using know-how and methodologies which might otherwise be proprietary to the
Company.
The Company's ability to obtain the benefit of the bookings commitments
under the Restated Teaming Agreement may be affected by Gemini's
creditworthiness. Under the terms of the Restated Teaming Agreement, Gemini is
not required to provide the Company with information regarding Gemini's
financial condition. Based on information made publicly available by an
affiliate of Gemini, the Company believes that Gemini experienced a
significant decline in sales and profits as well as capacity problems in 1995,
and that Gemini's results for the first quarter of 1996 were below its budget
for such quarter.
In each of the three six month periods ended April 30, 1996, Gemini's actual
bookings were lower than the minimum bookings provided for under the Teaming
Agreement. During the six month period commenced on May 1, 1995 and ended
October 31, 1995, Gemini's bookings commitment (as defined in the Teaming
Agreement) to the Company was $8.25 million. The actual bookings for such
period, net of bookings applied to the prior period deficiency, totalled
approximately $1.9 million. Gemini satisfied the resulting $6.3 million
deficiency in the subsequent six month period through a combination of
revenues generated from client work referred to Renaissance by Gemini, work
performed by Renaissance as a subcontractor for Gemini, work performed by
Renaissance directly for Gemini and the acquisition by Gemini from the Company
of certain Company program designs and related materials. During the six month
period commenced on November 1, 1995 and ended April 30, 1996, Gemini's
bookings commitment to the Company was $7.0 million. The actual bookings for
the period, net of bookings applied to the prior period deficiency, totalled
approximately $1.2 million. Gemini issued to Renaissance a purchase order for
the deficiency of approximately $5.8 million. This purchase order was
satisfied by Gemini in the subsequent six month period through a combination
of revenues generated from client work referred to Renaissance by Gemini of
approximately $4.0 million and a cash payment by Gemini to Renaissance of
$750,000 in the third fiscal quarter of 1996 in satisfaction of the remaining
$1.8 million purchase order obligation. The Company's net income for the third
fiscal quarter of 1996 was favorably affected by this cash payment which was
included in revenues and had no incremental cost associated with it. During
the six month period commenced on May 1, 1996 and ending on October 31, 1996,
Gemini's bookings commitment to the Company is $8.0 million. Approximately
$4.0 million in revenues generated from the estimated $5.0 million in bookings
in this six month period will be applied to satisfy the prior period
deficiency. Pursuant to the terms of the Restated Teaming Agreement,
Renaissance and Gemini have agreed that Gemini will satisfy the resulting
bookings deficiency for the period ending October 31, 1996 with a one-time
payment by Gemini to Renaissance of approximately $1.6 million (subject to
adjustment in accordance with the terms of the Restated Teaming Agreement), to
be made simultaneously with the closing of this offering.
Simultaneously with the closing of the Company's initial public offering in
April 1995, the Company sold to Gemini two warrants (the "Gemini Warrants") to
purchase up to 633,600 shares of Common Stock. In addition, Messrs. Lasker and
Lubin and Melissa E. Norton, the wife of David Norton, sold to Gemini, at such
closing, options (the "Gemini Options") to purchase up to an aggregate of
150,000 shares of Common Stock held by them. The Gemini Warrants and the
Gemini Options were subsequently transferred by Gemini to the Gemini Selling
Stockholder. The Gemini Selling Stockholder will exercise the Gemini Warrants
and the Gemini Options and sell the shares of Common Stock represented thereby
in connection with this offering.
6
<PAGE>
See "Business--Relationship with Gemini."
Concentration of Revenues. The Company has in the past derived, and may in
the future derive, a significant portion of its revenues from a relatively
limited number of major projects. In 1994, 1995 and the first three fiscal
quarters of 1996, revenues from services and other amounts billable to Gemini
accounted for approximately 65%, 24% and 27%, respectively, of the Company's
total revenues. Revenues from services billable to Gemini in 1994 include
revenues from services provided to CIGNA by the Company as a subcontractor on
behalf of Gemini pursuant to the Teaming Agreement. These revenues from
services provided to CIGNA accounted for approximately 45% of the Company's
total revenues in 1994. In addition, revenues from services billable to
divisions of AT&T and to Mobil accounted for approximately 14% and 12%,
respectively, of the Company's total revenues in 1994 and revenues from
services billable to divisions of AT&T and to CIGNA accounted for
approximately 36% and 12%, respectively, of the Company's total revenues in
1995. In the first three fiscal quarters of 1996, revenues from services
billable to operating companies of AT&T accounted for approximately 46% of the
Company's total revenues. The Company anticipates that revenues from operating
companies of AT&T will decrease in the future because several engagements for
this group of clients have been completed. The Company's revenues and earnings
can fluctuate from quarter to quarter based on the number of customer
engagements and the requirements of these engagements. In accordance with
industry practice, nearly all of the Company's contracts are terminable by
either the customer or the Company on short or no notice and without penalty.
An unanticipated termination of a major project could have a material adverse
effect on the Company's business and results of operations.
Variability of Quarterly Operating Results. Variations in the Company's
revenues and operating results occur from quarter to quarter as a result of a
number of factors. Quarterly revenues and operating results can depend on the
size of customer engagements during a quarter, the number of working days in a
quarter and employee utilization rates. The timing of revenues is difficult to
forecast because the Company's sales cycle is relatively long in the case of
new customers and may depend on factors such as the size and scope of
assignments and general economic conditions. Because a high percentage of the
Company's expenses are relatively fixed, a variation in the level of customer
assignments can cause significant variations in operating results from quarter
to quarter and could result in losses. The Company attempts to manage its
personnel utilization rates by closely monitoring project timetables and
staffing requirements for new projects. While the number of professional staff
may be adjusted to some degree to reflect active projects, the Company must
maintain a sufficient number of senior professionals to oversee existing
customer projects and participate in securing new customer engagements. In
addition, most of the Company's engagements are terminable without customer
penalty. An unanticipated termination of a major project could result in an
increase in underutilized employees and a decrease in revenues and profits or
the incurrence of losses.
Dependence on Principal Service Offerings; Need to Develop New
Offerings. The Company currently derives substantially all of its revenue from
two service offerings, consulting services based on its Balanced Scorecard
methodology and client/server systems integration services relating to the
design and development of desktop applications to support business processes.
Any factor adversely affecting the sales or profitability of these services
could have a material adverse effect on the Company's business and results of
operations. The market for desktop applications of the type offered by the
Company is new, reflecting the greater use of client/server architecture and
related computer and computer software technology. Accordingly, there can be
no assurance that this market will develop as anticipated by the Company.
The Company's future success will depend in significant part on its ability
to successfully develop and introduce new service offerings and improved
versions of existing service offerings. There can be no assurance that the
Company will be successful in developing, introducing on a timely basis and
marketing such service offerings or that any service offerings will be
accepted in the market. Moreover, services offered by others may render the
Company's services non-competitive or obsolete. See "Business--Services."
Project Risks. Many of the Company's engagements involve projects which are
critical to the operations of its customers' businesses and which provide
benefits that may be difficult to quantify. The Company's failure or inability
to meet a customer's expectations in the performance of its services could
result in the incurrence by the Company of a financial loss and could damage
the Company's reputation and adversely
7
<PAGE>
affect its ability to attract new business. In addition, an unanticipated
difficulty in completing a project could have an adverse effect on the
Company's business and results of operations. Fees for the Company's
engagements typically are based on the project schedule, Renaissance staffing
requirements, the level of customer involvement and the scope of the project
as agreed upon with the customer at the project's inception. The Company
generally seeks to obtain an adjustment in its fees in the event of any
significant change in any of the assumptions upon which the original estimate
was based. However, there can be no assurance that the Company will be
successful in obtaining any such adjustment in the future.
Management of Growth. The Company is currently experiencing a period of
rapid growth which has placed and could continue to place a strain on the
Company's financial, management and other resources. From January 1, 1993
through September 27, 1996, the size of the Company's professional staff
increased from 17 to 111 full-time equivalent employees, and further increases
are anticipated. Since January 1, 1993, the Company has expanded
geographically by adding employees based in New York, Chicago and London. The
Company intends to open additional domestic and international offices as
needed. The Company's ability to manage its staff and facilities growth
effectively will require it to continue to improve its operational, financial
and other internal systems and to train, motivate and manage its employees. If
the Company's management is unable to manage growth effectively and new
employees are unable to achieve anticipated performance levels, the Company's
business and results of operations could be adversely affected.
Attraction and Retention of Key Personnel; Dependence on Founders. The
Company's business involves the delivery of professional services and is labor
intensive. The Company's success will depend in large part upon its ability to
attract, retain and motivate highly skilled employees. There is significant
competition for employees with the skills required to perform the services
offered by the Company. Although the Company expects to continue to attract
and retain sufficient numbers of highly skilled employees for the foreseeable
future, there can be no assurance that the Company will be able to do so. The
loss of any of the Company's three founders or other key personnel could have
a material adverse effect on the Company's business and results of operations,
including its ability to attract employees and secure and complete
engagements. See "Dependence on Gemini."
Competition. The management consulting and client/server systems integration
markets are subject to rapid change and are highly competitive. The Company
competes with and faces potential competition for customer assignments and
experienced personnel from a number of companies that have significantly
greater financial, technical and marketing resources, generate greater
revenues and have greater name recognition than does the Company. In addition,
the management consulting and client/server systems integration markets are
highly fragmented and served by numerous firms, many of which serve only their
respective local markets. The Company's customers primarily consist of major
corporations, and there are an increasing number of professional services
firms seeking management consulting and client/server systems integration
engagements from that customer base. The Company believes that the principal
competitive factors in the management consulting and client/server systems
integration industries include the nature of the services offered, quality of
service, responsiveness to customer needs, experience, technical expertise and
price. There can be no assurance that the Company will continue to compete
successfully with its existing competitors or will be able to compete
successfully with any new competitors. See "Business--Competition."
Control by Directors and Officers. Upon completion of this offering, the
Company's officers and directors, and their affiliates, will beneficially own
approximately 33.7% of the Company's outstanding Common Stock. As a practical
matter, these stockholders, if acting together, may have the ability to elect
the Company's directors and to determine the outcome of corporate actions
requiring stockholder approval, irrespective of how other stockholders of the
Company may vote. This concentration of ownership may have the effect of
delaying or preventing a change in control of the Company. See "Management"
and "Principal and Selling Stockholders." Pursuant to a voting agreement
entered into in connection with the Reorganization, Messrs. Lasker and Lubin,
Melissa E. Norton (the wife of Mr. Norton), the Harry M. Lasker Children's
Trust and the David A. Lubin Children's Trust have agreed to vote their shares
of Common Stock to elect to the Company's Board of Directors one individual
designated by each of Messrs. Lasker and Lubin and Ms. Norton. The current
designees to the Board of Directors under this voting agreement are Messrs.
Lasker, Lubin and Norton. The voting agreement will continue in effect until
October 31, 1998.
8
<PAGE>
Risks Associated with Potential Acquisitions. The Company's strategy
includes the potential acquisition of businesses, products and technologies
that are complementary to those of the Company. Promising acquisitions are
difficult to identify and complete for a number of reasons, including
competition among prospective buyers. There can be no assurance that the
Company will be able to complete acquisitions or that the Company will be able
to successfully integrate any acquired businesses, and the failure of the
Company to successfully complete acquisitions or to integrate any acquired
businesses could have a material adverse effect on the Company's business and
results of operations. In order to finance such acquisitions, it may be
necessary for the Company to raise additional funds through public or private
financings. Any equity or debt financing, if available at all, may be on terms
which are not favorable to the Company and, in the case of equity financing,
may result in dilution to the Company's stockholders.
Antitakeover Provisions. The Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") requires that any
action required or permitted to be taken by stockholders of the Company must
be effected at a duly called annual or special meeting of stockholders and may
not be effected by any consent in writing, and the Company's Amended and
Restated By-laws (the "Restated By-laws") require reasonable advance notice by
a stockholder of a proposal or director nomination which such stockholder
desires to present at any annual or special meeting of stockholders. Special
meetings of stockholders may be called only by a Chairman, the Chief Executive
Officer or, if none, the President of the Company or by the Board of
Directors. The Restated Certificate of Incorporation provides for a classified
Board of Directors, and members of the Board of Directors may be removed only
for cause upon the affirmative vote of holders of at least two-thirds of the
shares of capital stock of the Company entitled to vote. The affirmative vote
of the holders of 75% of the shares of capital stock of the Company issued and
outstanding and entitled to vote is required to amend or repeal these
provisions. In addition, the Board of Directors has the authority, without
further action by the stockholders, to fix the rights and preferences of, and
issue shares of, Preferred Stock. These provisions, as well as other
provisions of the Restated Certificate of Incorporation and the Restated By-
laws, may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of the Company, including
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices. In addition, these provisions may
limit the ability of stockholders to approve transactions that they may deem
to be in their best interests.
International Operations. Sales outside North America accounted for
approximately 16% and 17% of the Company's revenues in the year ended December
31, 1995 and in the first three fiscal quarters of 1996, respectively. The
Company intends to expand its presence in European markets and anticipates
that international sales will account for an increasing portion of revenues in
the future. International revenues are subject to a number of risks, including
the following: agreements may be difficult to enforce and receivables
difficult to collect through a foreign country's legal system; foreign
customers may have longer payment cycles; foreign countries could impose
additional withholding taxes or otherwise tax the Company's foreign income,
impose tariffs or adopt other restrictions on foreign trade; fluctuations in
exchange rates could affect product demand and adversely affect the
profitability in U.S. dollars of services provided by the Company in foreign
markets where payment for the Company's services is made in the local
currency; U.S. export licenses may be difficult to obtain; and the protection
of intellectual property in foreign countries may be more difficult to
enforce. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business and results of operations.
See "Business--Marketing, Sales and Customers."
Possible Volatility of Share Price. The market price of the Company's Common
Stock, which is quoted on the Nasdaq National Market, may be subject to
significant fluctuations in response to operating results, announcements of
new contracts or service offerings by Renaissance or its competitors and other
factors. In addition, the stock market in recent years has experienced extreme
price and volume fluctuations that often have been unrelated or
disproportionate to the operating performance of individual companies. These
market fluctuations, as well as general economic conditions, may adversely
affect the market price of the Common Stock.
9
<PAGE>
Intellectual Property Rights. The Company's success is dependent in part
upon its management consulting and client/server systems integration
methodologies and other intellectual property, some of which is proprietary to
the Company. A significant portion of the Company's management consulting
services are based on the Balanced Scorecard concept described in three
Harvard Business Review articles and in The Balanced Scorecard, a recently
published book, all of which were co-authored by one of the Company's
founders. The Company believes that the Balanced Scorecard name is in the
public domain. As a result, third parties may provide services using the
Balanced Scorecard name which are competitive with the services offered by the
Company.
The Company relies upon a combination of trade secret, nondisclosure and
other contractual arrangements, and copyright and trademark laws to protect
its proprietary rights. The Company presently holds no patents or registered
copyrights, trademarks or service marks. The Company generally enters into
confidentiality agreements with its employees, consultants, customers and
potential customers and limits distribution of its proprietary information.
There can be no assurance that the steps taken by the Company in this regard
will be adequate to deter misappropriation of its proprietary information or
that the Company will be able to detect unauthorized use and take appropriate
steps to enforce its intellectual property rights. Although the Company
believes that its services and products do not infringe on the intellectual
property rights of others, there can be no assurance that such a claim will
not be asserted against the Company in the future. See "Business--Intellectual
Property."
RECENT DEVELOPMENTS
PROPOSED AMENDMENT TO THE COMPANY'S 1995 EQUITY INCENTIVE PLAN
On September 18, 1996, the Board of Directors adopted, subject to
stockholder approval, an amendment (the "Amendment") to the Company's 1995
Equity Incentive Plan (the "Plan") increasing the number of shares of Common
Stock available for issuance under the Plan from 1,100,000 to 2,100,000
(subject to adjustment for certain changes in the Company's capitalization).
The Board of Directors has called a Special Meeting of Stockholders of the
Company, to be held on November 15, 1996, for the purpose of approving the
Amendment. As of September 27, 1996, 38,604 shares remained available for
stock option grants and restricted stock awards to Renaissance employees under
the Plan. If the Amendment is approved, the Company will have additional
authorized shares of Common Stock available for future grants and awards,
including grants and awards in connection with any merger, consolidation or
acquisition by the Company.
THE COMPANY
The Company was organized as a Delaware corporation in March 1992. In
December 1993, the Company contributed all of its assets, subject to all of
its liabilities, to Renaissance Strategy Group Limited Partnership, a Delaware
limited partnership (the "Partnership"), in exchange for the sole general
partnership interest in the Partnership. The business of the Company described
in this Prospectus was conducted by the Partnership from December 1993 to
April 1995.
Pursuant to a reorganization agreement (the "Reorganization Agreement")
entered into among the Company, the Partnership, the limited partners of the
Partnership, the holders of certain units of economic interest in the
Partnership ("Units") and the holders of certain options to purchase Units,
effective on April 3, 1995, the Partnership was dissolved and all of its
assets and liabilities were distributed to and assumed by the Company. The
reorganization of the Company described above is referred to in this
Prospectus as the "Reorganization."
Unless the context otherwise requires, references herein to the "Company"
and "Renaissance" refer to Renaissance Solutions, Inc., a Delaware
corporation, and, with respect to operations between December 1, 1993 and
April 3, 1995, the Partnership, and its wholly-owned subsidiaries, Renaissance
Solutions Limited and Renaissance Securities Corp. References to historical
financial information of the Company prior to April 3, 1995 refer to the
historical financial information of its predecessors. See Note 1 of the Notes
to Consolidated Financial Statements.
The Company's principal office is located at Lincoln North, 55 Old Bedford
Road, Lincoln, Massachusetts 01773 and its telephone number is (617) 259-8833.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to Renaissance from the sale of shares of Common Stock
offered by the Company hereby are estimated to be approximately $1.6 million
(approximately $7.9 million if the Underwriters' overallotment option is
exercised in full) after deducting the estimated underwriting discount and
offering expenses payable by the Company and assuming a public offering price
of $40.25 per share (the last reported sale price on October 24, 1996). The
Company will also receive approximately $10.3 million from the Gemini Selling
Stockholder as payment of the exercise price of the Gemini Warrants and
approximately $348,000 from certain other Selling Stockholders as payment of
the exercise price of the stock options being exercised by such Selling
Stockholders in connection with the offering. The Company will also receive
approximately $1.6 million (subject to adjustment in accordance with the terms
of the Restated Teaming Agreement) from Gemini upon the closing of the
offering pursuant to the terms of the Restated Teaming Agreement. See
"Business--Relationship with Gemini."
The Company will not receive any of the net proceeds from the sale of shares
by the Selling Stockholders or from the exercise of the Gemini Options by the
Gemini Selling Stockholder. Upon exercise of the Gemini Options, the Gemini
Selling Stockholder will pay an aggregate of approximately $2.7 million to
Harry M. Lasker, David A. Lubin and Melissa E. Norton, representing the
exercise price of the Gemini Options and repayment with interest of the
promissory notes issued by Gemini in connection with the purchase of the
Gemini Options. See "Risk Factors--Dependence on Gemini" and "Principal and
Selling Stockholders."
The Company expects to use the net proceeds from this offering for working
capital and other general corporate purposes. The Company has not as yet
identified specific uses for such proceeds and will have discretion over their
use and investment.
The Company intends to seek acquisitions of businesses, products and
technologies that are complementary to those of the Company, and a portion of
the net proceeds may also be used for such acquisitions. While the Company
engages from time to time in discussions with respect to potential
acquisitions, the Company has no commitments or agreements with respect to any
such acquisitions as of the date of this Prospectus, and there can be no
assurances that any such acquisitions will be made. See "Risk Factors--Risks
Associated with Acquisition Strategy."
Pending such uses, the Company intends to invest the net proceeds from this
offering in short-term, investment grade, interest-bearing instruments.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol RENS. The following table sets forth for the periods indicated the high
and low sales prices for the Company's Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
1996 ------- -------
<S> <C> <C>
Fourth quarter (through October 24, 1996)................. $49.250 $35.250
Third quarter............................................. 42.375 25.500
Second quarter............................................ 35.500 27.500
First quarter............................................. 30.000 13.250
1995
Fourth quarter............................................ $24.750 $13.000
Third quarter............................................. 26.750 13.000
Second quarter (from April 4, 1995)....................... 15.750 9.500
</TABLE>
On October 24, 1996, the last reported sale price for the Company's Common
Stock on the Nasdaq National Market was $40.25 per share. As of October 22,
1996, the Company had 27 stockholders of record.
11
<PAGE>
CAPITALIZATION
The following table sets forth as of September 27, 1996 (i) the actual
capitalization of the Company, and (ii) the capitalization of the Company as
adjusted to reflect (a) the exercise by the Gemini Selling Stockholder of the
Gemini Warrant, (b) the exercise by certain Selling Stockholders of options to
purchase 31,250 shares of Common Stock, and (c) the issuance and sale by the
Company of 50,150 shares of Common Stock offered hereby and receipt of the net
proceeds therefrom, after deducting the estimated underwriting discount and
offering expenses payable by the Company. See "Use of Proceeds." This table
should be read in conjunction with the Company's Consolidated Financial
Statements and the Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 27, 1996
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS
EXCEPT SHARE DATA)
<S> <C> <C>
Short-term borrowings, consisting of amounts outstanding
on line of credit...................................... $ -- $ --
======= =======
Long-term liabilities................................... $ 161 $ 161
------- -------
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; no shares issued and outstanding actual
and as adjusted...................................... -- --
Common stock, $.0001 par value; 20,000,000 shares
authorized; 7,035,318 shares issued and outstanding,
actual; 7,750,318 shares issued and outstanding, as
adjusted (1)......................................... 1 1
Additional paid-in capital............................ 45,389 59,254
Warrants to acquire Common Stock...................... 1,600(2) --
Cumulative translation adjustments.................... (33) (33)
Unrealized gain on marketable securities.............. 17 17
Retained earnings..................................... 6,453 6,453
------- -------
Stockholders' equity................................. 53,427 65,692
------- -------
Total capitalization................................ $53,588 $65,853
======= =======
</TABLE>
- ---------------------
(1) Gives effect to (i) the exercise by certain Selling Stockholders of
options to purchase a total of 31,250 shares of Common Stock to be sold by
such Selling Stockholders in this offering and (ii) the exercise by the
Gemini Selling Stockholder of warrants to purchase, and the issuance by
the Company of, 633,600 shares of Common Stock. Excludes, as of September
27, 1996 (i) 931,504 shares of Common Stock (excluding options to purchase
31,250 which will be exercised and sold in connection with this offering)
reserved for issuance upon the exercise of options outstanding, (ii)
38,604 shares of Common Stock reserved for future option grants and stock
awards under the Company's 1995 Equity Incentive Plan, (iii) 25,000 shares
of Common Stock reserved for future option grants under the Company's 1995
Director Stock Option Plan, and (iv) 407,858 shares of Common Stock
reserved for future stock purchases under the Company's 1995 Employee
Stock Purchase Plan. The Board of Directors of the Company recently
approved an amendment to the Company's 1995 Equity Incentive Plan, subject
to stockholder approval, increasing the number of shares of Common Stock
available for issuance thereunder from 1,100,000 to 2,100,000. See "Recent
Developments--Proposed Amendment to the Company's 1995 Equity Incentive
Plan" and Notes 7 and 8 of Notes to Consolidated Financial Statements.
(2) Consists of receipt of proceeds from the sale of the Gemini Warrants to
Gemini for an aggregate purchase price of $1,600,000.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information with respect to
the Company's consolidated statements of operations for the period from March
23, 1992 (date of inception) through December 31, 1992, for the years ended
December 31, 1993, 1994 and 1995 and for the nine months ended September 27,
1996 and with respect to the Company's consolidated balance sheets as of
December 31, 1994 and 1995 and September 27, 1996 have been derived from the
Company's audited Consolidated Financial Statements. The audit report of
Deloitte & Touche LLP as of December 31, 1994 and 1995 and September 27, 1996,
for each of the three years in the period ended December 31, 1995 and for the
nine months ended September 27, 1996 is included in the Consolidated Financial
Statements. The statement of operations data for the nine months ended
September 29, 1995 are derived from the Company's unaudited financial
statements also appearing herein, which have been prepared on the same basis
as the Company's audited consolidated financial statements and, in the opinion
of management, contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations
for such period. The operating results for the nine months ended September 27,
1996 are not necessarily indicative of the results that may be expected for
the full fiscal year ending December 31, 1996 or for any subsequent period.
This information should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and with the
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 23,
1992 YEARS ENDED
(INCEPTION) DECEMBER 31, NINE MONTHS ENDED
THROUGH -------------------------- -------------------
DECEMBER 31, SEPT. 29, SEPT. 27,
1992 1993 1994 1995 1995 1996
------------ ------- -------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $1,500 $ 2,540 $ 12,881 $22,601 $15,721 $25,395
------ ------- -------- ------- ------- -------
Costs and expenses:
Professional
personnel............. 940 2,563 6,508 11,484 8,224 13,617
Professional
development and
recruiting............ -- 266 693 1,258 982 1,318
Marketing and sales.... 15 157 276 589 383 1,047
General and
administrative........ 325 1,252 2,494 4,113 2,873 4,354
------ ------- -------- ------- ------- -------
Total costs and
expenses............ 1,280 4,238 9,971 17,444 12,462 20,336
------ ------- -------- ------- ------- -------
Income (loss) from
operations............. 220 (1,698) 2,910 5,157 3,259 5,059
Interest expense........ (6) (43) (126) (80) (57) (41)
Interest income......... -- -- 16 490 355 899
------ ------- -------- ------- ------- -------
Income (loss) before
income taxes........... 214 (1,741) 2,800 5,567 3,557 5,917
Provision for income
taxes.................. -- -- -- 1,891 1,087 2,302
------ ------- -------- ------- ------- -------
Net income (loss) (1)... $ 214 $(1,741) $ 2,800 $ 3,676 $ 2,470 $ 3,615
====== ======= ======== ======= ======= =======
PRO FORMA DATA (2):
Historical income (loss)
before income taxes.... $ 214 $(1,741) $ 2,800 $ 5,567 $ 3,557 $ 5,917
------ ------- -------- ------- ------- -------
Historical income taxes. -- -- -- 1,891 1,087 2,302
Additional provision
(credit) for income
taxes.................. 87 (87) 593 336 336 --
------ ------- -------- ------- ------- -------
Pro forma income taxes.. 87 (87) 593 2,227 1,423 2,302
------ ------- -------- ------- ------- -------
Pro forma net income
(loss)................. $ 127 $(1,654) $ 2,207 $ 3,340 $ 2,134 $ 3,615
====== ======= ======== ======= ======= =======
Pro forma net income per
share.................. $ .44 $ .56 $ .36 $ .49
======== ======= ======= =======
Pro forma weighted
average number of
common and common
equivalent shares
outstanding (3)........ 4,993 5,913 5,758 7,376
======== ======= ======= =======
<CAPTION>
DECEMBER 31,
-------------------------------------
SEPT. 27,
1992 1993 1994 1995 1996
------- ------- ------- --------- ---------
(IN-THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents
and marketable
securities............. $ 55 $ -- $ 1,384 $10,930 $42,149
Total assets............ 717 1,345 5,653 23,025 56,481
Current portion of
long-term debt......... -- -- 667 -- --
Stockholder's equity.... 214 (1,527) 1,274 18,765 53,427
</TABLE>
(1) From its inception in 1992 through its Reorganization in April 1995, the
Company was either an S corporation or a limited partnership and
accordingly was not subject to federal and state income taxes.
(2) The pro forma statement of operations data have been computed as if the
Company were subject to federal and all applicable state corporate income
taxes from inception, based on the statutory tax rates and the tax laws
then in effect. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes 2 and 9 of Notes to
Consolidated Financial Statements.
(3) Based on the weighted average number of common shares and common share
equivalents outstanding. See Notes 1 and 2 of Notes to Consolidated
Financial Statements.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The Company derives substantially all of its revenues from management
consulting and client/server systems integration services. The Company markets
its services directly and through the Teaming Agreement with Gemini. Pursuant
to the Teaming Agreement, Renaissance and Gemini have agreed to market and
perform certain service offerings on a collaborative basis. Approximately 79%,
54% and 43% of the Company's revenues in 1994 and 1995 and for the nine months
ended September 27, 1996, respectively, resulted from its relationship with
Gemini; approximately 65%, 24% and 27% of revenues were from services and
other amounts billable to Gemini and approximately 14%, 30% and 16% of
revenues were from services billable directly to third parties in 1994 and
1995 and for the nine months ended September 27, 1996, respectively. The
Company and Gemini have entered into the Restated Teaming Agreement, which
will become effective upon the closing of this offering. See "Risk Factors--
Dependence on Gemini" and "Business--Relationship with Gemini."
Fees for services provided by the Company typically are based on the project
schedule, Renaissance staffing requirements, the level of customer involvement
and the scope of the project as agreed upon with the customer at the project's
inception. The Company generally seeks to obtain an adjustment in its fees in
the event of any significant change in any of the assumptions upon which the
original estimate was based. The Company records revenues at estimated
realizable rates as labor hours are incurred. Provisions are made for
estimated unbillable and uncollectible amounts.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's consolidated
statements of operations.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, NINE MONTHS ENDED
-------------------- ---------------------------
SEPTEMBER 29, SEPTEMBER 27,
1993 1994 1995 1995 1996
----- ----- ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Costs and expenses:
Professional personnel..... 100.9 50.5 50.8 52.3 53.6
Professional development
and recruiting............ 10.5 5.4 5.6 6.3 5.2
Marketing and sales........ 6.2 2.1 2.6 2.4 4.1
General and administrative. 49.3 19.4 18.2 18.3 17.2
----- ----- ----- ----- -----
Total costs and expenses. 166.9 77.4 77.2 79.3 80.1
----- ----- ----- ----- -----
Income (loss) from
operations.................. (66.9) 22.6 22.8 20.7 19.9
Interest income (expense),
net......................... (1.6) (.9) 1.8 1.9 3.4
----- ----- ----- ----- -----
Income (loss) before income
taxes....................... (68.5) 21.7 24.6 22.6 23.3
Provision for income taxes... -- -- 8.4 6.9 9.1
----- ----- ----- ----- -----
Net income (loss)............ (68.5)% 21.7% 16.2% 15.7% 14.2%
===== ===== ===== ===== =====
PRO FORMA DATA:
Historical income (loss)
before income taxes......... (68.5)% 21.7% 24.6% 22.6% 23.3%
----- ----- ----- ----- -----
Historical income taxes...... -- -- 8.4 6.9 9.1
Additional provision (credit)
for income taxes............ (3.4) 4.6 1.5 2.1 --
----- ----- ----- ----- -----
Pro forma income taxes....... (3.4) 4.6 9.9 9.0 9.1
----- ----- ----- ----- -----
Pro forma net income (loss).. (65.1)% 17.1% 14.7% 13.6% 14.2%
===== ===== ===== ===== =====
</TABLE>
14
<PAGE>
Nine Months Ended September 27, 1996 Compared with Nine Months Ended
September 29, 1995
Revenues increased 62% to $25.4 million in the first three quarters of 1996
from $15.7 million in the first three quarters of 1995. This increase in
revenues was primarily attributable to the significantly increased level of
services performed for clients by both the Strategic Management Services Group
and the Performance Innovation Services Group. Revenues attributable to the
Company's relationship with Gemini represented 43% and 46% of total revenues
in the nine month periods ended September 27, 1996 and September 29, 1995,
respectively. The Company expects that revenues from Gemini will decrease as a
percentage of revenues in the future. See "Risk Factors--Dependence on
Gemini." Revenues from operating companies of AT&T represented, in the
aggregate, approximately 46% and 32% of the Company's revenues in the nine
month periods ended September 27, 1996 and September 29, 1995, respectively.
The Company anticipates that revenues attributable to operating companies of
AT&T will decrease in the future because several engagements for this group of
clients have been completed. See "Risk Factors--Concentration of Revenues."
In each of the three six month periods ended on April 30, 1996, Gemini's
actual bookings were lower than the minimum bookings provided for under the
Teaming Agreement. Gross bookings attributable to Gemini under the Teaming
Agreement (without regard to the application of bookings to prior period
deficiencies) for the six month periods ended April 30, 1995, October 31, 1995
and April 30, 1996 were $6.8 million, $2.0 million and $5.3 million,
respectively. For the six month period ending October 31, 1996, the Company
estimates that such gross bookings will total approximately $5.0 million.
Because bookings for the six month period ended October 31, 1995 were
substantially below the bookings commitment for such period, bookings for the
subsequent six month period ended April 30, 1996 were, and for the six month
period ending October 31, 1996 will be, in accordance with the Teaming
Agreement, used to satisfy prior period deficiencies.
In particular, during the six month period commenced on May 1, 1995 and
ended October 31, 1995, Gemini's bookings commitment to the Company was $8.25
million. The actual bookings for such period, net of bookings applied to the
prior period deficiency, totalled approximately $1.9 million. Gemini satisfied
the resulting $6.3 million deficiency in the subsequent six month period
through a combination of revenues generated from client work referred to
Renaissance by Gemini, work performed by Renaissance as a subcontractor for
Gemini, work performed by Renaissance directly for Gemini and the acquisition
by Gemini from the Company for $2.2 million (included in revenue for the nine
months ended September 27, 1996) of certain Company program designs and
related materials. During the six month period commenced on November 1, 1995
and ended April 30, 1996, Gemini's bookings commitment to the Company was $7.0
million. The actual bookings for the period, net of bookings applied to the
prior period deficiency, totalled approximately $1.2 million. Gemini issued to
Renaissance a purchase order for the deficiency of approximately $5.8 million.
This purchase order was satisfied by Gemini in the subsequent period through a
combination of revenues generated from client work referred to Renaissance by
Gemini of approximately $4.0 million and a cash payment by Gemini to
Renaissance of $750,000 in the third quarter of 1996 in satisfaction of the
remaining $1.8 million purchase order obligation. The Company's net income for
the third fiscal quarter of 1996 was favorably affected by this cash payment
which was included in revenues and had no incremental cost associated with it.
During the six month period commenced on May 1, 1996 and ending on October
31, 1996, Gemini's bookings commitment to the Company is $8.0 million.
Approximately $4.0 million in revenues generated from the estimated $5.0
million in bookings in this six month period will be applied to satisfy the
prior period deficiency. Renaissance and Gemini have agreed that Gemini will
satisfy the bookings deficiency for this period with a one time payment by
Gemini to Renaissance of approximately $1.6 million (subject to adjustment in
accordance with the terms of the Restated Teaming Agreement), to be made
simultaneously with the closing of this offering. See "Risk Factors--
Dependence on Gemini" and "Business--Relationship with Gemini."
Professional personnel costs increased 66% in the first three quarters of
1996 to $13.6 million, or 54% of revenues, from $8.2 million, or 52.3% of
revenues, in the first three quarters of 1995. The number of full-time
equivalent professional employees increased to 111 at September 27, 1996 from
82 at September 29, 1995. The increase in personnel costs resulted from the
addition of 15 professionals in December 1995, the standardization of all
employee compensation adjustments to January of each year beginning in January
1996 and professional time investment in the Company's Web-based information
services offering.
15
<PAGE>
Professional development and recruiting costs increased 34% in the first
three quarters of 1996 to $1.3 million, or 5% of revenues, from $982,000, or
6% of revenues, in the first three quarters of 1995. This increase in
professional development and recruiting costs resulted primarily from
significant expansion in the number of professional employees retained by the
Company.
Marketing and sales expenses increased 173% in the first three quarters of
1996 to $1.0 million, or 4% of revenues, from $383,000, or 2% of revenues, in
the first three quarters of 1995. This increase in marketing and sales
expenses reflected an increase in the level and scope of marketing
communications activities in 1996. The Company is expanding its marketing and
sales efforts and therefore expects related expenses to increase as a
percentage of revenues in the future. See "Business--Marketing, Sales and
Customers."
General and administrative expenses increased 52% in the first three
quarters of 1996 to $4.4 million, or 17% of revenues, from $2.9 million, or
18% of revenues, in the first three quarters of 1995. This increase in general
and administrative expenses resulted primarily from additional costs necessary
to support the growth in the Company's business and professional staff during
1996 and included increases in salary costs for administrative staff,
increases in facilities and operating expenses and investments in upgrading
the Company's telecommunications (video and audio), networks and systems.
Interest expense declined 28% in the first three quarters of 1996 to
$41,000, or 0.2% of revenues, from $57,000, or 0.4% of revenues, for the first
three quarters of 1995. This decline was primarily attributable to the
reduction in interest payments to Gemini under a $2.0 million working capital
loan from Gemini to the Company (the "Gemini Loan"), which was repaid
following the Company's initial public offering in April 1995, offset by
payments made to Shawmut Bank under the Company's working capital line of
credit. Interest income increased 153% in the first three quarters of 1996 to
$899,000, or 4% of revenues, from $355,000, or 2% of revenues, for the first
three quarters of 1995. This increase was primarily the result of higher cash
balances from cash generated by operations and the proceeds from the Company's
follow-on public offering in May 1996. Interest income consists of interest
earned on the Company's cash, cash equivalents and marketable securities.
The provision for income taxes in the first three quarters of 1996 was $2.3
million or 39% compared with a pro forma tax provision of $1.4 million or 40%
in the first three quarters of 1995. The 1995 figure was computed as if the
Company had been taxable as a C Corporation since its inception. Prior to its
Reorganization on April 3, 1995, the Company was not subject to federal or
state income taxes at the Company level.
1995 Compared with 1994
Revenues increased 75% to $22.6 million in 1995 from $12.9 million in 1994.
This increase in revenues was primarily attributable to the significantly
increased level of services performed for clients by the Performance
Innovation Services Group. Revenues from three operating companies of AT&T
represented, in the aggregate, approximately 36% of the Company's revenues in
1995. Revenues attributable to the Company's relationship with Gemini
represented approximately 54% and 79% of the Company's total revenues in 1995
and 1994, respectively.
Professional personnel costs (which includes salaries and benefits and costs
associated with independent contractors) increased 76% in 1995 to $11.5
million, or 51% of revenues, from $6.5 million, or 51% of revenues, in 1994.
Professional personnel costs in 1995 reflect the election by the Company's Co-
Chairmen and Chief Executive Officer to permanently forego a total of $150,000
in compensation to which they were otherwise entitled in 1995. The number of
full-time equivalent professional employees increased to 91 at December 31,
1995, from 56 at December 31, 1994. This increase in personnel resulted from
the need to staff an increasing level of customer engagements.
Professional development and recruiting costs increased 82% in 1995 to $1.3
million, or 6% of revenues, from 693,000, or 5% or revenues, in 1994. This
increase in professional development and recruiting costs was primarily
attributable to the addition of significant numbers of professional personnel
by the Company in 1995.
16
<PAGE>
Marketing and sales expenses increased 113% in 1995 to $589,000, or 3% of
revenues, from $276,000, or 2% of revenues, in 1994. This increase in
marketing and sales expenses reflected increased public relations and other
marketing communications activities in 1995. The Company is expanding its
marketing and sales efforts and therefore expects related expenses to increase
as a percentage of revenues in the future. See "Business--Marketing, Sales and
Customers."
General and administrative expenses increased 65% in 1995 to $4.1 million,
or 18% of revenues, from $2.5 million, or 19% of revenues, in 1994. This
increase in general and administrative expenses resulted primarily from
additional costs necessary to support the growth in the Company's business and
professional staff during 1995 and included increases in salary costs for
administrative staff as well as increases in facilities and operating
expenses.
Interest expense declined 37% in 1995 to $80,000, or 0.4% of revenues, from
$126,000, or 1% of revenues, for 1994. This decline was primarily attributable
to the reduction in interest payments to Gemini under a $2.0 million working
capital loan from Gemini to the Company (the "Gemini Loan"), which was repaid
following the Company's initial public offering in April 1995. Interest income
was $490,000, or 2.2% of revenues, for 1995, up from $16,000, or less than 1%
of revenues, during 1994. The increase in interest income resulted from
interest earned on the proceeds of the Company's initial public offering.
The pro forma provision for income taxes in 1995 was $2.2 million compared
with a pro forma tax provision of $593,000 in 1994. Both figures are computed
as if the Company had been taxable as a C Corporation since its inception.
Prior to its Reorganization on April 3, 1995, the Company was not subject to
federal or state income taxes at the Company level. The 1995 pro forma
effective tax rate was 40%. The 1994 pro forma effective tax rate of 21% was
less than the federal statutory tax rate of 34% due to the carryforward of
operating losses from 1993.
Under the Teaming Agreement as then in effect, during the six month period
commenced on May 1, 1995 and ended October 31, 1995, Gemini was obligated to
provide the Company with bookings (as defined in the Teaming Agreement) of
$8.25 million. The actual bookings for such period totalled approximately $1.9
million. Gemini satisfied the approximately $6.3 million deficiency through a
combination of revenues generated from client work referred to Renaissance by
Gemini, work performed by Renaissance as a subcontractor for Gemini and work
performed by Renaissance directly for Gemini. A portion of the deficiency
satisfied directly by Gemini was payable in installments through September 1,
1996.
1994 Compared with 1993
Revenues increased to $12.9 million in 1994 from $2.5 million in 1993. This
increase in revenues was primarily attributable to the significantly increased
level of services performed for customers by both the Company's Strategic
Services Group and Performance Innovation Services Group. This increase was
primarily attributable to additional engagements resulting from the Company's
collaboration with Gemini. Revenues attributable to the Company's relationship
with Gemini represented approximately 79% and 28% of the Company's total
revenues in 1994 and 1993, respectively. The Company began its collaboration
with Gemini in June 1993.
Professional personnel costs increased 154% in 1994 to $6.5 million, or 51%
of revenues, from $2.6 million, or 101% of revenues, in 1993. The number of
full-time equivalent professional employees increased to 56 at December 31,
1994 from 17 at December 31, 1993. This increase in personnel resulted from
the need to staff an increasing level of customer engagements. At December 31,
1994, independent contractors represented 7 of the Company's 56 full-time
equivalent professional personnel, compared with one of the Company's 17 full-
time equivalent professional personnel at December 31, 1993.
Professional development and recruiting costs increased 161% in 1994 to
$693,000, or 5% of revenues, from $266,000, or 11% of revenues, in 1993. This
increase in professional development and recruiting costs was primarily
attributable to the addition of significant numbers of professional personnel
by the Company in 1994.
17
<PAGE>
Marketing and sales expenses increased 76% in 1994 to $276,000, or 2% of
revenues, from $157,000, or 6% of revenues, in 1993. This increase in
marketing and sales expenses reflected increased marketing activities in 1994,
including executive seminars in New York and London, regular newsletters and
direct mail initiatives. The Company is expanding its marketing and sales
efforts and therefore expects related expenses to increase as a percentage of
revenues in the future. See "Business--Marketing, Sales and Customers."
General and administrative expenses increased 99% in 1994 to $2.5 million,
or 19% of revenues, from $1.3 million, or 49% of revenues, in 1993. This
increase in general and administrative expenses resulted primarily from
additional costs necessary to support the growth in the Company's business and
staff in 1994 and included increases in salaries and benefits for additional
administrative personnel and increases in facilities costs.
Interest expense increased 193% in 1994 to $126,000, or 1% of revenues, from
$43,000, or 2% of revenues, in 1993. This increase in interest expense was
primarily attributable to higher average daily balances under the Gemini Loan,
which was outstanding for all of 1994 and only a portion of 1993. Interest
income was $16,000 in 1994. Interest income consists of interest earned on the
Company's excess cash balances. The Company did not realize any interest
income in 1993.
The pro forma provision for income taxes in 1994 was $593,000 compared with
a pro forma credit provision of $87,000 in 1993, both computed as if the
Company had been taxable as a C corporation since its inception. Prior to the
Reorganization, the Company was not subject to federal or state income taxes
at the Company level. The 1994 pro forma effective tax rate of 21% was less
than the federal statutory tax rate of 34% due to the carryforward of
operating losses from 1993. The 1993 pro forma effective tax credit rate of 5%
was less than the federal statutory tax rate of 34% due to the 1993 operating
loss.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company's financing requirements have been met through a
combination of funds generated by operations, loans from Gemini, bank
borrowings, loans from certain of the Company's stockholders, the sale of
Common Stock in the Company's initial and follow-on public offerings and the
sale to Gemini of the Gemini Warrants. At September 27, 1996, the Company had
working capital of $51.5 million, an increase of $34.8 million as compared to
working capital of $16.7 million at December 31, 1995. The increase was
primarily attributable to the Company's follow-on offering in May 1996, which
provided net proceeds of $28.8 million.
Funds provided (used) by operations amounted to $(1,638,000), $2,287,000,
$(2,306,000) and $1,985,000 for 1993, 1994, 1995 and the first three fiscal
quarters of 1996, respectively. Accounts receivable and unbilled services
increased significantly in 1994 over 1993 and in 1995 over 1994 as a result of
the increased services performed by the Company in these years. Accounts
receivable and unbilled services increased 253% to $3.2 million on December
31, 1994, as compared to $904,000 on December 31, 1993. During the same
period, revenues increased 407%, to $12.9 million from $2.5 million. Accounts
receivable and unbilled services increased 199% to $9.6 million on December
31, 1995 as compared to $3.2 million on December 31, 1994. During this same
period revenues increased 75%, to $22.6 million from $12.9 million in 1994.
Accounts receivable and unbilled services increased 19% to $11.4 million on
September 27, 1996 as compared to $9.6 million on December 31, 1995. Advance
payments are recorded when billings exceed revenues earned or expenses
incurred. In 1994, advance payments increased to $983,000 from $0 in 1993 as a
result of billings in excess of revenues earned and expenses incurred with
respect to one customer. In 1995, advanced payments decreased to $341,000 from
$983,000 in 1994. Advance payments in the first three fiscal quarter of 1996
decreased to $131,000 from $341,000 in 1995.
Capital expenditures were $331,000, $774,000, $1,391,000 and $1,283,000 for
1993, 1994, 1995 and the first three fiscal quarters of 1996, respectively.
The Company expects capital expenditures in the remainder of 1996 to be
approximately $250,000, primarily for the purchase of computer hardware and
software, for furniture and fixtures and for leasehold improvements. In August
1996 the Company entered into an operating
18
<PAGE>
lease with Digital Equipment Corporation ("Digital") pursuant to which Digital
repurchased a portion of the Company's installed base of computers and will
provide the Company with certain equipment, services and support. Under this
operating lease, the Company will pay Digital approximately $407,000, $1.2
million, $1.2 million and $866,000 in 1996, 1997, 1998 and 1999, respectively.
Net cash used for investing activities of $15.2 million during the nine
month period ended September 27, 1996 resulted primarily from the purchase of
marketable securities.
On July 21, 1994, the Company entered into a revolving line of credit
agreement with Shawmut Bank (now Fleet Bank, N.A.) providing for borrowings of
up to $1.0 million. The line of credit agreement was subsequently amended to
increase the amount available for borrowings to $3.5 million. This line of
credit expires on June 1, 1997. As of December 31, 1995, $1.5 million was
outstanding under the line. No borrowings were outstanding under the line as
of October 23, 1996. The line of credit includes customary financial and other
covenants relating to the maintenance of certain financial tests, such as
minimum tangible net worth and quarterly profitability, and restricting the
Company's ability to incur additional indebtedness. On August 25, 1995, the
Company entered into a revolving line of credit agreement with Barclays Bank
in London providing for borrowings of up to British Pound Sterling 250,000.
The line of credit was subsequently amended to increase the amount available
for borrowings to British Pound Sterling 425,000. No borrowings were
outstanding under the line as of December 31, 1995 or October 23, 1996. See
Note 6 of Notes to Consolidated Financial Statements.
The Company made a partnership distribution totaling $2,672,000 in January
1995, which represented the cumulative net earnings of the Partnership from
December 1, 1993 through December 31, 1994. The Company made a final
partnership distribution totaling $754,475 in March 1995, which represented
the estimated amount of the Partnership's net earnings during the period
commencing on January 1, 1995 and ending immediately prior to the
Reorganization. Both the January 1995 and the March 1995 partnership
distributions were evidenced by the Stockholder Notes and were repaid from a
portion of the net proceeds of the Company's initial public offering. The
partnership distributions represent earnings of the Partnership upon which the
recipients of the Stockholder Notes have been or will be required to pay
income taxes.
In the event that the Restated Teaming Agreement is validly terminated by
either party prior to its expiration, Renaissance is required to pay a
termination fee to Gemini in an amount declining from $1.6 million in the
event of a termination prior to November 1, 1996 to $250,000 in the event of a
termination prior to November 1, 1999.
Management believes that funds generated by operations, existing cash
balances (including proceeds from the Company's initial and follow-on public
offerings), borrowings under the bank lines and the net proceeds from this
offering will be sufficient to meet the Company's working capital and capital
expenditure requirements for at least the next twelve months. Thereafter, the
Company's liquidity will be materially dependent upon its internally generated
funds and its ability to obtain funds from financings from external sources,
in the form of either additional equity or indebtedness. The Company's ability
to borrow will be a function of the level of its internally generated funds
and the assets of its business that are available to serve as collateral,
which will consist primarily of accounts receivable.
19
<PAGE>
BUSINESS
Renaissance Solutions, Inc. ("Renaissance" or the "Company") provides
management consulting and client/server systems integration services,
primarily for large corporations. The Company's offerings fall into two
categories, strategic services and performance innovation services, both of
which can incorporate consulting services and technology implementation.
Strategic services consist primarily of management consulting services using
the "Balanced Scorecard" concept described in three Harvard Business Review
articles and in The Balanced Scorecard, a recently published book, all of
which were co-authored by one of the Company's founders and the design,
development and implementation of software-based executive information
systems. The Company's strategic services are designed to assist senior
executives in strategy implementation. The Company's performance innovation
services include the design, development and implementation of desktop
applications using client/server architecture to support decision-making,
coordination, information sharing and skill development by knowledge workers.
These applications are designed for key business processes, including market
and product development, sales, order fulfillment and customer service. The
Company believes that by bridging management consulting and systems
integration capabilities it can help its customers effectively use technology
to satisfy their strategic objectives.
THE RENAISSANCE SOLUTION
Renaissance combines its expertise in management consulting and
client/server systems integration to assist customers in developing innovative
solutions to their business needs. The Company believes that the combination
of defining an organization's strategy in terms of measurable goals and
implementing information systems in support of these goals differentiates
Renaissance from its competitors. Renaissance focuses on projects that are
intended to have a significant effect on a customer's future profitability or
competitive market position.
Renaissance's service offerings are designed to support both the strategic
and operational processes of large corporations, as follows:
. At the strategic level, the Company provides management consulting
services, based primarily on the Balanced Scorecard methodology, that are
intended to identify strategic corporate objectives and measure an
organization's progress in achieving these objectives. In addition, the
Company designs, develops and implements software-based executive
information systems, or "Strategic Feedback Systems" ("SFS"), that
provide desktop information and communications tools for use by senior
executives in achieving these objectives.
. At the business process level, the Company designs, develops and
implements desktop applications using client/server architecture to
support key business processes, such as market and product development,
sales, order fulfillment and customer service. These applications are
designed to assist knowledge workers in meeting increased performance
requirements created by new or redesigned work processes.
STRATEGY
Renaissance's goal is to be a leading provider of management consulting and
client/server systems integration services to corporations seeking major
performance improvements. The Company is pursuing the following strategies to
achieve this goal.
. Emphasize a Multidisciplinary Approach. The Company believes that a key
factor differentiating Renaissance's service offerings is the combination
of its expertise in management consulting and client/server systems
integration. The Company believes that by bridging management consulting
and systems integration capabilities it can help its customers
effectively use technology to satisfy their strategic objectives.
. Provide Tailored Solutions Using Proprietary Methodologies and Reusable
Software Components. The Company is investing in proprietary
methodologies and reusable software components for both its strategic and
performance innovation offerings. Although the Company
20
<PAGE>
individually tailors solutions for each customer, it leverages its
capabilities through the use of these proprietary methodologies and
software components. The Company believes that this approach reduces
development time and project costs, enhances project quality, permits
rapid expansion of the Company's professional staff and differentiates the
Company's services from those of its competitors.
. Build Renaissance Brand Name. The Renaissance name is closely associated
with the Balanced Scorecard management consulting methodology. The
Balanced Scorecard concept was described in three articles appearing in
the Harvard Business Review in 1992, 1993 and 1996 and in The Balanced
Scorecard, a recently published book, all of which were co-authored by
one of the Company's founders. The Company seeks to promote its name
association with the Balanced Scorecard through additional publications,
speaking engagements and other marketing activities. By building name
recognition for both Renaissance and the Balanced Scorecard, the Company
believes it can differentiate Renaissance from its competitors.
. Broaden Customer Base Through Targeted Industry Marketing, Geographic
Expansion and Alliances. The Company plans to continue to expand
significantly its marketing initiatives and capabilities. The Company is
expanding its professional staff through the addition of personnel with
consulting expertise in selected industries and is increasing its
customer marketing initiatives, including publications and executive
seminars. The Company also plans to continue to expand geographically by
adding offices in major United States and foreign cities. Finally, the
Company is seeking marketing alliances with technology providers who
offer products or services that complement the Company's service
offerings.
SERVICES
Renaissance's offerings are delivered through two service groups, the
Strategic Services Group and the Performance Innovation Services Group.
Strategic Services Group
The Company's strategic services include management consulting based on the
Company's Balanced Scorecard methodology, complementary consulting services
and the design and development of desktop applications to assist senior
executives in strategy implementation. The goal of the Balanced Scorecard
methodology is to provide senior managers with a framework to translate a
corporate strategy into measurable objectives, measures and targets. The
Balanced Scorecard methodology is designed to consolidate measurement of many
of the disparate elements of a company's competitive agenda, such as becoming
customer oriented, improving quality, reducing time to market for new products
and managing for the long term.
At the beginning of a typical Balanced Scorecard engagement, Renaissance
representatives meet with the customer's chief executive officer, chief
financial officer or other senior executives and interview members of the
customer's management team to solicit information regarding the customer's
strategic objectives. In order to obtain a consensus regarding these
objectives, Renaissance then conducts workshops with various members of the
management team.
After a consensus is reached, Renaissance analyzes the customer's strategy
from four perspectives: financial, customer, business process and
organizational learning. The Company, working with the customer's management,
then identifies and selects the best indicators of achievement of each of the
strategic objectives, distinguishing between forward looking or "lead"
indicators and backward looking or "lag" indicators. Renaissance then maps
these indicators against the four categories of strategic objectives into a
"Balanced Scorecard." Using the Balanced Scorecard and supporting
methodologies, Renaissance works with the customer to identify the performance
factors that most significantly affect the customer's strategic objectives.
Fees for services provided by the Company's Strategic Services Group
typically are based on the project schedule, Renaissance staffing
requirements, the level of customer involvement and the scope of the project
21
<PAGE>
as agreed upon with the customer at the project's inception. The Company
generally seeks to obtain an adjustment in its fees in the event of any
significant change in any of the assumptions upon which the original estimate
was based. Fees for the Company's Balanced Scorecard engagements vary
significantly depending on the size and complexity of the customer's business
and the scope of the engagement, but have ranged from under $100,000 to in
excess of $1,000,000. Since its inception in 1992, the Company has delivered
approximately 105 Balanced Scorecards for different business units within over
30 organizations.
The Company also offers complementary services related to the Balanced
Scorecard. In 1994 the Company developed the Strategic Feedback System, which
is an executive information system that provides senior executives with
desktop access to strategic information presented in the form of performance
measurements derived from the Balanced Scorecard. Fees for SFS engagements
have ranged from approximately $100,000 to approximately $1,000,000. Since its
introduction in 1994, the Company has completed five SFS engagements for four
different organizations. The Company offers SFS services to existing customers
for which it has provided Balanced Scorecard services and to new customers as
an integral part of future Balanced Scorecard services.
Performance Innovation Services Group
The Company's Performance Innovation Services Group designs, develops and
assists in implementing desktop applications using client/server architecture
to support key business processes, such as market and product development,
sales, order fulfillment and customer service. These systems are designed to
enable customers to reduce costs, speed time to market and improve
coordination among knowledge workers.
The Company's desktop applications are used to generate, access and
disseminate information not typically available in existing legacy systems,
including:
. Reference Data: explanations and supporting documentation on products,
processes and customers, such as product specifications for use in
responding to customer inquiries.
. Procedural Data: decision support in the form of "if/then" rules,
interpretations and best practice information, such as a checklist of
remedial steps to be taken following the discovery of a billing error.
. Performance Data: feedback measurements regarding individual and process
performance, such as proposal to sales ratios used by an organization's
sales force.
The Company believes that the availability of this type of data is critical to
improving knowledge worker productivity.
The Company has designed and developed desktop applications both independent
of and as follow-ons to Balanced Scorecard engagements. In situations in which
Renaissance has not previously prepared a Balanced Scorecard for the customer,
Renaissance typically prepares an abbreviated Balanced Scorecard to assess the
strategic objectives to be addressed as part of the design and development of
the desktop application.
In developing desktop applications, the Company uses rapid prototyping
techniques, standard database and groupware software, application development
tools and reusable software components. In addition, the Company has developed
customizable templates and tools for use in system design. These techniques,
tools and components are intended to reduce development time and project costs
and increase the productivity of the Company's professionals.
Fees for services provided by the Company's Performance Innovation Services
Group typically are based on the project schedule, Renaissance staffing
requirements, the level of customer involvement and the scope of the project
as agreed upon with the customer at the project's inception. The Company
generally seeks to obtain an adjustment in its fees in the event of any
significant change in any of the assumptions upon which the original estimate
was based. Fees for the Company's desktop application engagements vary
significantly depending on the size and complexity of the customer's business
and the scope of the engagement, but have
22
<PAGE>
ranged from under $500,000 for a pilot system to in excess of $3,000,000 for a
large multi-application engagement. Since its inception in 1992, the Company
has performed 26 engagements involving the design and development of desktop
applications for 16 organizations.
MARKETING, SALES AND CUSTOMERS
The Company markets its services to senior executives of large corporations
both directly and on a collaborative basis with Gemini. The Company markets
its services in the United States through its Boston headquarters and its
Chicago and New York offices and in Europe through its London office. The
Company is in the process of increasing its European operations, which it
conducts principally out of its London office. See Note 11 of Notes to
Consolidated Financial Statements.
The Company continues to expand its direct marketing capabilities by hiring
industry sector specialists to undertake targeted business development
initiatives in the following industries: financial services; insurance; oil,
gas and chemical; computers and communications; healthcare and
pharmaceuticals; and retail and other. The Company is seeking marketing
alliances with technology providers who offer products or services that
complement the Company's service offerings.
The Company employs a variety of business development and marketing
techniques to communicate directly with current and prospective customers,
including authoring of articles and other publications regarding the Company's
methodologies, regular newsletters and direct mail initiatives and executive
seminars featuring presentations by senior officers of key customers. A
significant portion of Renaissance's marketing activities is carried out by
senior Renaissance executives.
The following table sets forth a list of selected customers for which the
Company, either directly or in collaboration with Gemini, has provided
services in either 1994 or 1995:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES INSURANCE OIL, GAS AND CHEMICAL
--------- --------- ---------------------
<S> <C> <C>
Barclays Bank PLC CIGNA Corporation Mobil Corporation
Chemical Bank North American Life Nova Chemical Sales, Inc.
Federal National Assurance Company Nova Gas
Mortgage Mercantile & General Praxair, Inc.
Association Union Carbide
Corporation
Univar Corporation
</TABLE>
<TABLE>
<CAPTION>
COMPUTERS AND
COMMUNICATIONS RETAIL AND OTHER
-------------- ----------------
<S> <C>
AT&T Corp. The Limited, Inc.
British Telecom Inc.
</TABLE>
An important component of the Company's marketing strategy is to offer
additional services to existing customers. For example, the Company's Balanced
Scorecard services often result in follow-on projects for other business units
within the customer organization. In the first three fiscal quarters of 1996,
the Company provided services to 13 of the 37 customers for whom the Company
provided services in 1995.
In 1995 and the first three fiscal quarters of 1996, revenues from services
and other amounts billable to Gemini accounted for approximately 24% and 27%,
respectively, of the Company's total revenues, and revenues from services
billable to divisions of AT&T accounted for approximately 36% and 46%,
respectively, of the Company's total revenues in such periods. In 1995,
revenues from services billable to CIGNA accounted for approximately 12% of
the Company's total revenues. See Note 11 of Notes to Consolidated Financial
Statements.
23
<PAGE>
RELATIONSHIP WITH GEMINI
Since 1993 the Company has been a party to a Teaming Agreement with Gemini
pursuant to which the Company and Gemini have agreed to perform on a
collaborative basis certain service offerings obtained as a result of Gemini
marketing efforts or joint Gemini/Renaissance marketing efforts. These joint
service offerings include Balanced Scorecard and desktop application design,
development and implementation engagements.
Gemini is a worldwide consulting firm that provides business and system
transformation services which are complementary to Renaissance's service
offerings. The Company believes that its relationship with Gemini currently
provides the Company with access to potential customers that the Company would
not otherwise be able to obtain. Approximately 79%, 54% and 43% of the
Company's revenues in 1994, 1995 and the first three fiscal quarters of 1996,
respectively, resulted from its relationship with Gemini; approximately 65%,
24% and 27%, respectively, of revenues were from services and other amounts
billable to Gemini and approximately 14%, 30% and 16%, respectively, of
revenues were from services billable directly to third parties. In many of
these engagements, the Company provided services as a subcontractor to Gemini.
The Company and Gemini have entered into the Restated Teaming Agreement,
which will become effective upon the closing of this offering. The following
is a summary of the material terms of the Restated Teaming Agreement.
The Restated Teaming Agreement has a term ending on November 1, 1999. It is
subject to termination by Gemini as a result of, among other things, the
occurrence of a change in control of Renaissance, which is defined generally
to mean (i) the sale or other disposition of all or substantially all of the
assets of the Company, (ii) the consummation of a transaction pursuant to
which any person (other than an existing stockholder or a Gemini competitor,
as defined in the Restated Teaming Agreement) becomes the beneficial owner of
securities representing more than 40% of the combined voting power of the
Company, (iii) the consummation of a transaction pursuant to which a Gemini
competitor becomes the beneficial owner of securities representing more than
25% of the combined voting power of the Company, or (iv) a merger or
consolidation of the Company with any other entity resulting in the holders of
Renaissance Common Stock immediately prior to such transaction ceasing to hold
at least 50% of the combined voting power of Renaissance or the surviving
entity after such transaction. In the event that the Restated Teaming
Agreement is validly terminated by either party prior to its expiration,
Renaissance is required to pay a termination fee to Gemini in an amount
declining from $1.6 million in the event of a termination prior to November 1,
1996 to $250,000 in the event of a termination prior to November 1, 1999. In
addition, in such event, various payment obligations contained in the Restated
Teaming Agreement will terminate on the termination date.
During the term of the Restated Teaming Agreement, the Company and Gemini
have agreed to staff jointly engagements for their collaborative service
offerings. Final staffing decisions are made by the party with primary
responsibility for the customer.
Under the Restated Teaming Agreement, the Company has agreed to train Gemini
in use of the Company's Balanced Scorecard, desktop application and certain
other methodologies prior to November 1, 1998, to perpetually license these
methodologies, to the extent developed prior to November 1, 1998, to Gemini on
a non-exclusive basis and to perform certain services for Gemini in 1996. In
exchange, Gemini has agreed to pay the Company an annual fee of $2.0 million
in each of the years during the three year period ending October 31, 1997.
Revenue for these services will be recognized by the Company as the services
are performed pursuant to the terms of the Restated Teaming Agreement. The
license of methodologies by Renaissance to Gemini expressly excludes any
software created by Renaissance. The Company is obligated to pay Gemini an
annual fee of $400,000 in each of the years during the three year period
ending October 31, 1997 for certain training services provided by Gemini to
Renaissance personnel.
As part of the Restated Teaming Agreement, Gemini has committed to provide
the Company with certain levels of bookings. The minimum bookings commitments
total $12.0 million in the twelve month period ending October 31, 1997 and
$12.5 million in each of the twelve month periods ending October 31, 1998 and
1999. As described below, these commitments represent a 50% reduction in
Gemini's minimum bookings commitments under the Teaming Agreement. For the
twelve month period ended October 31, 1995, bookings attributable to Gemini
under the Teaming Agreement (without regard to the application of bookings
attributable to prior period deficiencies) totalled approximately $8.7
million. For the twelve month period ending October 31, 1996, the Company
estimates that such bookings (without regard to application of bookings to
prior period deficiencies) will total approximately $10.3 million.
24
<PAGE>
In the event that during any of the six month periods during the term of the
Restated Teaming Agreement bookings obtained by Renaissance from Gemini
customers or customers of joint service offerings by Renaissance and Gemini
are less than the specified minimum bookings, Gemini may retain the services
of Renaissance for a fee equal to the amount of the deficiency. If at the end
of twelve months a bookings deficiency still remains, Gemini is required to
make a compensating payment to Renaissance of 25% of the remaining deficiency
in full satisfaction of the bookings deficiency. In no event will Gemini be
obligated to make a payment with respect to any bookings deficiency in an
amount in excess of 25% of such deficiency.
The Company monitors Gemini's progress in meeting its bookings commitments
through regular conference calls and meetings with Gemini marketing
representatives. Under the Restated Teaming Agreement, "bookings" are
generally defined as gross fees (excluding expense reimbursements) committed
to Renaissance as a result of the relationship with Gemini during the
applicable six month period for services to be provided within twelve months
of the commitment, as evidenced by a written agreement between the Company and
the customer, plus any such fees actually collected by the Company during such
period which are not evidenced by a written agreement. Gemini generally is
treated as having satisfied its bookings commitment regardless of whether
revenues are recognized by Renaissance with respect to a particular
engagement. For example, under the Restated Teaming Agreement, 50% of the fees
attributable to a cancelled contract count towards Gemini's bookings
commitment if such cancellation is not primarily attributable to the actions
or omissions of Gemini. In accordance with industry practice, nearly all of
the Company's contracts are terminable by either the customer or the Company
on short or no notice and without penalty. In addition, Gemini does not
guarantee the collectibility of any receivables resulting from customer
engagements under the Restated Teaming Agreement.
The amount of Gemini's bookings commitment is subject to adjustment as a
result of, among other things, any failure by Renaissance to make available to
Gemini such quantities of marketing and sales resources and such number of
staff for joint service offerings as may from time to time be mutually agreed
upon by the parties. In addition, Gemini's minimum bookings commitment
terminates in the event that any of Messrs. Lasker, Lubin or Norton ceases for
any reason to be employed by the Company on a full time basis. In such event,
the parties have agreed to negotiate in good faith to establish new
commitments for the remainder of the term of the Restated Teaming Agreement.
The Restated Teaming Agreement supersedes a prior agreement entered into
between the Company and Gemini in October 1994, as amended through March 1996.
In general, the Restated Teaming Agreement provides for a reduction by 50% in
Gemini's minimum bookings commitments for the twelve month periods ended
October 31, 1997, 1998 and 1999 and the elimination of various contractual
covenants in favor of Gemini, including non-competition restrictions, rights
of first refusal, rights of first offer and limitations on issuances and
transfers of securities by the Company and the Principal Stockholders, which
were previously set forth in the Teaming Agreement. The Restated Teaming
Agreement also provides for a reduction in the termination fee payable by
Renaissance in the event of a valid termination of the agreement by either
party and for the payment of certain license fees by Gemini to Renaissance in
five equal installments of $1.0 million during the period commencing on the
date of the closing of this offering and ending on November 1, 1998.
Simultaneously with the closing of the Company's initial public offering in
April 1995, the Company sold to Gemini two warrants (the "Gemini Warrants") to
purchase up to 633,600 shares of Common Stock. In addition, Messrs. Lasker and
Lubin and Melissa E. Norton, the wife of David Norton (collectively, the
"Principal Stockholders") sold to Gemini, at such closing, options (the
"Gemini Options") to purchase up to an aggregate of 150,000 shares of Common
Stock held by them. The Gemini Warrants and the Gemini Options were
subsequently transferred by Gemini to the Gemini Selling Stockholder. The
Gemini Selling Stockholder will exercise the Gemini Warrants and the Gemini
Options and sell the shares of Common Stock acquired thereby in connection
with this offering. In connection therewith, the Gemini Selling Stockholder
will pay to the Company and the Principal Stockholders approximately $10.3
million and $2.7 million, respectively, representing the exercise price for
the Gemini Warrants and Gemini Options and, in the case of the payment to the
Principal Stockholders, the repayment with interest of the promissory notes
issued by Gemini in connection with the purchase of the Gemini Options.
25
<PAGE>
DEVELOPMENT OF SERVICE OFFERINGS
A significant element of Renaissance's strategy is the continuous
improvement of existing service offerings and the development of new and
related services. To implement this strategy, Renaissance seeks to identify
new and enhanced methodologies developed in the course of customer engagements
and to disseminate these developments as "best practices" through internal
training programs. In addition, the Company undertakes internal development
activities to enhance and extend its methodologies and technology. The Company
has organized a team of professionals whose primary responsibility is the
management of the Company's practice development efforts. This group has
developed an internal knowledge management system that provides rapid access
to new developments and support materials to all of the Company's employees.
In January 1996, the Company formally announced its Web-based information
services offering, an extension of its core performance innovation and
technology capabilities. This offering applies the Company's performance
innovation expertise to the structuring of business practices using the
capabilities afforded by the Internet's World Wide Web. The Company's offering
is designed to enable the continuous capture of business information and the
dynamic organization and delivery of that information. The Company has
completed four engagements of this offering and is currently involved in
similar engagements with two other clients. The Company has also developed a
core set of technologies that provide Web-based interfaces to enterprise
information systems as well as software agents for automated information
gathering and task monitoring.
COMPETITION
The management consulting and client/server systems integration markets
(which include the markets for the Company's strategic and performance
innovation services) are comprised of a large number of participants, are
subject to rapid change and are highly competitive. Primary competitors
include general management consulting firms and the consulting practices of
the "Big Six" accounting firms; systems consulting and integration firms; and
the professional service groups of computer equipment companies. In addition,
customers may elect to increase their internal strategic planning and
information systems resources to satisfy their needs for strategic and
performance innovation solutions. The Company may also face competition from
Gemini following the termination of the Restated Teaming Agreement in light of
the methodology license set forth therein. See "Relationship with Gemini."
Many participants in the management consulting and client/server systems
integration markets have significantly greater financial, technical and
marketing resources, greater name recognition and generate greater consulting
and systems integration revenues than does Renaissance. In addition, the
management consulting and client/server systems integration markets are highly
fragmented and served by numerous firms, many of which serve only their
respective local markets. The Company believes that the strong linkage between
its management consulting services and client/server systems integration
capabilities distinguishes it from its competitors.
The Company believes that the principal competitive factors in the
management consulting and client/server systems integration industries include
the nature of the service offering, quality of service, responsiveness to
customer needs, experience, technical expertise and price. The Company
believes that it competes favorably with respect to these factors.
HUMAN RESOURCES
As of September 27, 1996, the Company had a total staff of 148.5 full-time
equivalent employees, comprised of 143 full-time salaried employees, 1 part-
time salaried employees and 5 full- or part-time independent contractors. The
Company's total staff of 149 employees as of September 27, 1996 was comprised
of 111 professionals and 38 administrative employees.
26
<PAGE>
INTELLECTUAL PROPERTY
The Company's success is dependent in part upon its proprietary
methodologies and tools and other proprietary intellectual rights. A
significant portion of the Company's management consulting services are based
on the Balanced Scorecard concept described in three Harvard Business Review
articles and in The Balanced Scorecard, a recently published book, all of
which were co-authored by one of the Company's founders. The Company believes
that the Balanced Scorecard name is in the public domain. As a result, third
parties may provide services using the Balanced Scorecard name which are
competitive with the services offered by the Company.
The Company relies upon a combination of trade secret, non-disclosure and
other contractual arrangements, and copyright and trademark laws, to protect
its proprietary rights. The Company holds no patents or registered copyrights,
trademarks or service marks. The Company generally enters into confidentiality
agreements with its employees, consultants, customers and potential customers
and limits access to and distribution of its proprietary information. There
can be no assurance that the steps taken by the Company in this regard will be
adequate to deter misappropriation of its proprietary information or that the
Company will be able to detect unauthorized use and take appropriate steps to
enforce its intellectual property rights.
The Company's business includes the development of custom software
applications in connection with specific customer engagements. Ownership of
such software is generally assigned to the customer. In addition, the Company
also develops object-oriented software components that can be reused in
software application development and certain foundation and application
software products, or software "tools," most of which remain the property of
the Company.
Although the Company believes that its services and products do not infringe
on the intellectual property rights of others, there can be no assurance that
such a claim will not be asserted against the Company in the future.
FACILITIES
The Company's headquarters and principal administrative, sales and
marketing, and system development operations are located in approximately
40,000 square feet of leased space in Lincoln, Massachusetts. The Company
occupies these premises under a lease expiring in August 1999. The Company
also occupies office space in Chicago, New York and London. The Company
anticipates that additional space will be required as business expands and
believes that it will be able to obtain suitable space as needed.
27
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages as of
September 27, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Harry M. Lasker................. 52 Co-Chairman, Secretary and Director
David A. Lubin.................. 46 Co-Chairman, Treasurer and Director
President, Chief Executive Officer and
David P. Norton................. 55 Director
Gresham T. Brebach, Jr.......... 55 Executive Vice President-Client Services
Ronald K. Bohlin................ 44 Senior Vice President-Practice Development
George A. McMillan.............. 42 Vice President, Chief Financial Officer and
Chief Operating Officer
Robert S. Kaplan (1)............ 56 Director
John F. Rockart (1)............. 65 Director
</TABLE>
- ---------------------
(1) Member of the Compensation Committee and Audit Committee.
Mr. Lasker is a founder of the Company and has served as a director since
the Company's inception in March 1992 and as Co-Chairman and Secretary since
December 1993. From December 1981 to December 1991 Mr. Lasker served as Vice
President and Co-Chairman of Spectrum Interactive, Inc. ("Spectrum"), a
multimedia technology development company which he co-founded with Mr. Lubin.
Mr. Lubin is a founder of the Company and has served as Treasurer and a
director since the Company's inception in March 1992 and as Co-Chairman since
December 1993. From December 1981 to December 1991 Mr. Lubin served as Vice
President and Co-Chairman of Spectrum, which he co-founded with Mr. Lasker.
Mr. Norton is a founder of the Company and has served as President and a
director since the Company's inception in March 1992 and as Chief Executive
Officer since December 1993. From 1975 to February 1992 Mr. Norton served as
President of Nolan, Norton & Co., an information technology consulting firm.
Nolan, Norton & Co. was acquired by the accounting firm of KPMG Peat Marwick
in March 1987. As a result, Mr. Norton also served as a Partner of KPMG Peat
Marwick from March 1987 to February 1992.
Mr. Brebach joined the Company as Executive Vice President-Client Services
in January 1995. From August 1994 to December 1994 Mr. Brebach operated his
own consulting firm, Brebach and Associates. From April 1993 to August 1994
Mr. Brebach served as Executive Vice President of Digital Consulting, the
management consulting division of Digital Equipment Corporation. From December
1989 to April 1993 Mr. Brebach was a Director of McKinsey & Company, a
management consulting firm. Mr. Brebach is a director of Aspen Technology,
Inc.
Mr. Bohlin joined the Company as Senior Vice President-Practice Development
in December 1994. From September 1993 to November 1994 Mr. Bohlin served as
Vice President-Strategic Services at Digital Equipment Corporation. From
February 1992 to September 1993 Mr. Bohlin served as Vice President-Corporate
Marketing and Business Development at Analog Devices, Inc., a semiconductor
company. From
January 1981 to February 1992 Mr. Bohlin was a consultant, partner and
computer industry practice leader at McKinsey & Company.
Mr. McMillan joined the Company as Chief Operating Officer in July 1993 and
has served as Vice President, Chief Financial Officer and Chief Operating
Officer since January 1995. From March 1992 to June 1993 Mr. McMillan operated
his own strategy consulting firm, focusing on strategy development for
underperforming corporations. From April 1989 to March 1992 Mr. McMillan
served as President and Chief Operating Officer of the Michigan Bulb Company,
a direct mailer of horticultural catalogs.
28
<PAGE>
Dr. Kaplan has served as a director of the Company since April 1995. Dr.
Kaplan is the Marvin Bower Professor of Leadership Development at Harvard
Business School, where he has been a member of the faculty since September
1983.
Dr. Rockart has served as a director of the Company since April 1995. Dr.
Rockart has been a Senior Lecturer at the Center for Information Systems
Research of the Alfred P. Sloan School of Management of the Massachusetts
Institute of Technology since 1974 and has been the Director of the Center for
Information Systems Research since 1976. Dr. Rockart is a director of
ComShare, Inc. and Keane, Inc.
29
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of September 30, 1996, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, by
(i) each person or entity known to the Company to own beneficially more than
5% of the Company's Common Stock, (ii) each of the Company's directors, (iii)
each of the Senior Executives, (iv) all directors and executive officers as a
group, and (v) each of the other Selling Stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE BENEFICIALLY
OWNED PRIOR TO SHARES OWNED AFTER
OFFERING (1) OFFERED OFFERING (1)(2)
NAME AND ADDRESS OF ----------------------- ------- -----------------------------
BENEFICIAL OWNER NUMBER PERCENT NUMBER NUMBER PERCENT
------------------- ------------ ---------- ------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Harry M. Lasker (3)..... 975,785 13.9% 75,000 850,785 11.0%
c/o Renaissance
Solutions, Inc.
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
David A. Lubin (4)...... 975,786 13.9% 75,000 850,786 11.0%
c/o Renaissance
Solutions, Inc.
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
Melissa E. Norton (5)... 975,786 13.9% 75,000 850,786 11.0%
c/o Renaissance
Solutions, Inc.
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
Gemini Consulting,
Inc. (6)............... 783,600 10.2% 783,600 -- --
25 Airport Road
Morristown, NJ 07960
Putnam Investments,
Inc. (7)............... 705,783 10.0% -- 705,783 9.1%
One Post Office Square
Boston, MA 02109
OTHER DIRECTORS
David P. Norton (8)..... 975,786 13.9% 75,000 850,786 11.0%
Robert S. Kaplan (9).... 24,902 * -- 24,902 *
John F. Rockart (10).... 12,500 * -- 12,500 *
OTHER SENIOR EXECUTIVES
Gresham T. Brebach,
Jr. (11)............... 18,012 * 15,000 3,012 *
Ronald K. Bohlin (12)... 16,256 * 16,250 6 *
George A. McMillan (13). 48,075 * 10,000 38,075 *
All directors and
executive officers
as a group (8
persons) (14).......... 3,047,102 42.8% 266,250 2,630,852 33.7%
</TABLE>
- ---------------------
* Less than 1%
(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days after September 30,
1996 through the exercise of any stock option or other right. The
inclusion herein of such shares, however, does not constitute an
admission that the named stockholder is a direct or indirect beneficial
owner of such shares. Unless otherwise indicated, each person or entity
named in the table has sole voting power and investment power (or shares
such power with his or her spouse) with respect to all shares of capital
stock listed as owned by such person or entity.
(2) Assumes no exercise of the Underwriters' over-allotment option to
purchase up to an aggregate of 165,000 shares of Common Stock from the
Company.
30
<PAGE>
(3) Includes 117,023 shares held by The Harry M. Lasker Children's Trust (the
"Lasker Trust"), the beneficiaries of which are Mr. Lasker's children and
a trustee of which is Mr. Lasker's spouse, as to which shares Mr. Lasker
disclaims beneficial ownership. The Lasker Trust will sell 8,995 shares
in this offering. Shares held before offering include 50,000 shares of
Common Stock subject to a stock option granted to Gemini and subsequently
transferred to the Gemini Selling Stockholder, which option will be
exercised in connection with this offering.
(4) Includes 82,856 shares held by The David A. Lubin Children's Trust (the
"Lubin Trust"), the beneficiaries of which are Mr. Lubin's children, as
to which shares Mr. Lubin disclaims beneficial ownership. The Lubin Trust
will sell 10,000 shares in this offering. Shares held before offering
include 50,000 shares of Common Stock subject to a stock option granted
to Gemini and subsequently transferred to the Gemini Selling Stockholder,
which option will be exercised in connection with this offering.
(5) Shares held before offering include 50,000 shares of Common Stock subject
to a stock option granted to Gemini and subsequently transferred to the
Gemini Selling Stockholder, which option will be exercised in connection
with this offering. Ms. Norton is the spouse of David P. Norton, the
President, Chief Executive Officer and a Director of the Company.
(6) Consists of warrants to purchase 633,600 shares of Common Stock from the
Company and options to purchase an aggregate of 150,000 shares of Common
Stock from Messrs. Lasker and Lubin and Ms. Norton, all of which will be
exercised and sold in connection with this offering.
(7) The information reported is based on a Schedule 13G, dated September 9,
1996, filed with the Securities and Exchange Commission by Putnam
Investments, Inc. ("PI"), Marsh & McLennan Companies, Inc. ("MMC"),
Putnam Investment Management, Inc. ("PIM") and The Putnam Advisory
Company, Inc. ("PAC"). PI is a registered investment advisor, in which
capacity it advises PIM and PAC and has shared voting power with respect
to 121,800 shares and shared dispositive power with respect to 705,783
shares. PIM has shared dispositive power with respect to 548,283 shares.
PAC has shared voting power with respect to 121,800 shares and shared
dispositive power with respect to 157,500 shares. MMC is the parent
holding company of PI. PI and MMC disclaim beneficial ownership of such
shares.
(8) Includes 975,786 shares held by Melissa E. Norton, the spouse of Mr.
Norton, as to which shares Mr. Norton disclaims beneficial ownership.
Shares held before offering include 50,000 shares of Common Stock subject
to a stock option granted to Gemini and subsequently transferred to the
Gemini Selling Stockholder, which option will be exercised in connection
with this offering.
(9) Includes 14,900 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60 day period following
September 30, 1996.
(10) Consists of 12,500 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60 day period following
September 30, 1996.
(11) Consists of 18,012 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60 day period following
September 30, 1996 (15,000 of which will be exercised and sold in
connection with this offering).
(12) Consists of 16,256 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60 day period following
September 30, 1996 (16,250 of which will be exercised and sold in
connection with this offering).
(13) Includes 26,566 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60 day period following
September 30, 1996.
(14) Includes 88,234 shares of Common Stock subject to outstanding stock
options which are exercisable within the 60 day period following
September 30, 1996 (31,250 of which will be exercised and sold in
connection with this offering). Shares held before offering include
150,000 shares of Common Stock subject to stock options granted to Gemini
and subsequently transferred to the Gemini Selling Stockholder, which
options will be exercised in connection with this offering.
31
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Hambrecht
& Quist LLC, Cowen & Company and Robertson, Stephens & Company LLC have
severally agreed to purchase from the Company and the Selling Stockholders the
following respective numbers of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Hambrecht & Quist LLC ................................................
Cowen & Company ......................................................
Robertson, Stephens & Company LLC.....................................
---------
Total ................................................................ 1,100,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and the Selling
Stockholders, their counsel and the Company's independent auditors. The nature
of the Underwriters' obligation is such that they are committed to purchase
all shares of Common Stock offered hereby if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the public offering of the shares, the offering price and other selling
terms may be changed by the Underwriters. The Underwriters have informed the
Company that the Underwriters do not intend to confirm sales to accounts over
which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to an aggregate
of 165,000 additional shares of Common Stock at the public offering price,
less the underwriting discount, set forth on the cover of this Prospectus. To
the extent that the Underwriters exercise this option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of Common Stock to be purchased
by it shown in the above table bears to the number of shares of Common Stock
offered hereby. The Company will be obligated, pursuant to the option, to sell
such shares to the Underwriters to the extent the option is exercised. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
32
<PAGE>
The Selling Stockholders and the directors and executive officers of the
Company, who will own in the aggregate 2,630,852 shares of Common Stock after
this offering (assuming no exercise of the Underwriters' over-allotment
option), have agreed, subject to certain exceptions, that they will not
without the prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise dispose of any shares of Common Stock beneficially owned by them
during the 90 day period after the date of this Prospectus. The Company has
agreed that it will not, without the Underwriters' prior written consent,
offer, sell, grant any option to purchase or otherwise dispose of any shares
of Common Stock during the 90 day period after the date of this Prospectus,
except that the Company may issue, and grant options to purchase, shares of
Common Stock under its current equity incentive and stock purchase plans and
under currently outstanding options. The Company may also issue shares of
Common Stock in connection with any acquisition of another company if the
terms of such issuance provide that such Common Stock shall not be resold
prior to the expiration of the 90 day period referenced in the preceding
sentence. Sales of such shares in the future could adversely affect the market
price of the Common Stock.
Hambrecht & Quist LLC and Cowen & Company acted as representatives of the
underwriters of the Company's initial public offering in April 1995, and, with
Robertson, Stephens & Company LLC, as underwriters of the Company's public
offering in May 1996. In connection therewith, the underwriters were paid an
underwriting discount.
In general, the rules of the Commission will prohibit the Underwriters from
making a market in the Company's Common Stock during the "cooling off" period
immediately preceding the commencement of sales in the offering. The
Commission has, however, adopted exemptions from these rules that permit
passive market making under certain conditions. These rules permit an
underwriter to continue to make a market subject to the conditions, among
others, that its bid not exceed the highest bid by a market maker not
connected with the offering and that its net purchases on any one trading day
not exceed prescribed limits. Pursuant to these exemptions, certain
Underwriters, selling group members (if any) or their respective affiliates
intend to engage in passive market making in the Company's Common Stock during
the cooling off period.
LEGAL MATTERS
The validity of the shares of Common Stock offered by the Company hereby
will be passed upon for the Company by Hale and Dorr, Boston, Massachusetts,
and for the Underwriters by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1994
and 1995 and September 27, 1996, and for each of the three years in the period
ended December 31, 1995 and for the nine months ended September 27, 1996
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing in this Prospectus,
and have been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
33
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September
27, 1996................................................................. F-3
Consolidated Statements of Operations for the Years Ended December 31,
1993, 1994 and 1995 and nine months ended September 29, 1995 (Unaudited)
and September 27, 1996................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficiency) for the Years
Ended December 31, 1993, 1994 and 1995 and nine months ended September
27, 1996................................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995 and nine months ended September 29, 1995 (Unaudited)
and September 27, 1996................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Renaissance Solutions, Inc.:
We have audited the accompanying consolidated balance sheets of Renaissance
Solutions, Inc. and its subsidiaries as of December 31, 1994 and 1995, and
September 27, 1996, and the related consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for each of the three years
in the period ended December 31, 1995 and for the nine months ended September
27, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Renaissance Solutions, Inc.
and its subsidiaries as of December 31, 1994 and 1995, and September 27, 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995 and for the nine months ended
September 27, 1996 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Boston, Massachusetts
October 24, 1996
F-2
<PAGE>
RENAISSANCE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 27,
1994 1995 1996
------ ------- -------------
(AMOUNTS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $1,384 $ 6,040 $22,380
Marketable securities.......................... -- 4,890 19,769
Accounts receivable, net....................... 2,351 5,791 8,809
Unbilled services, net......................... 839 3,759 2,574
Receivable from officers/shareholders.......... -- 278 --
Prepaid expenses and other..................... 97 161 898
------ ------- -------
Total current assets......................... 4,671 20,919 54,430
Property and equipment, net...................... 982 2,034 1,979
Other assets..................................... -- 72 72
------ ------- -------
Total........................................ $5,653 $23,025 $56,481
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings.......................... $ -- $ 1,500 $ --
Current portion of note payable--Gemini........ 667 -- --
Accounts payable............................... 497 1,150 639
Accrued payroll and related costs.............. 754 850 1,789
Accrued income taxes........................... -- 270 66
Other accrued liabilities...................... 145 62 268
Advance payments............................... 983 341 131
------ ------- -------
Total current liabilities.................... 3,046 4,173 2,893
Note payable--Gemini, long-term portion.......... 1,333 -- --
Other liabilities................................ -- 87 161
------ ------- -------
Total liabilities............................ 4,379 4,260 3,054
------ ------- -------
Commitments and contingencies--Notes 7 and 10
Stockholders' equity:
Preferred stock, $.01 par value, authorized
2,000,000 shares, none issued................. -- -- --
Common stock, $.0001 par value, authorized
20,000,000 shares, issued and outstanding
4,567,396, 5,969,396 and 7,035,318 shares in
1994, 1995 and 1996, respectively............. -- 1 1
Additional paid in capital..................... 1 14,337 45,389
Warrants to acquire common stock............... -- 1,600 1,600
Cumulative translation adjustments............. -- (46) (33)
Unrealized gain on marketable securities....... -- 35 17
Retained earnings.............................. 1,273 2,838 6,453
------ ------- -------
Stockholders' equity......................... 1,274 18,765 53,427
------ ------- -------
Total........................................ $5,653 $23,025 $56,481
====== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
RENAISSANCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
YEARS ENDED
DECEMBER 31, SEPTEMBER 29,
------------------------- 1995 SEPTEMBER 27,
1993 1994 1995 (UNAUDITED) 1996
------- ------- ------- ------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 2,540 $12,881 $22,601 $15,721 $25,395
------- ------- ------- ------- -------
Costs and expenses:
Professional
personnel............ 2,563 6,508 11,484 8,224 13,617
Professional
development and
recruiting........... 266 693 1,258 982 1,318
Marketing and sales... 157 276 589 383 1,047
General and
administrative....... 1,252 2,494 4,113 2,873 4,354
------- ------- ------- ------- -------
Total costs and
expenses........... 4,238 9,971 17,444 12,462 20,336
------- ------- ------- ------- -------
Income (loss) from
operations............. (1,698) 2,910 5,157 3,259 5,059
Interest expense........ (43) (126) (80) (57) (41)
Interest income......... -- 16 490 355 899
------- ------- ------- ------- -------
Income (loss) before
income taxes........... (1,741) 2,800 5,567 3,557 5,917
Provision for income
taxes.................. -- -- 1,891 1,087 2,302
------- ------- ------- ------- -------
Net income (loss)....... $(1,741) $ 2,800 $ 3,676 $ 2,470 $ 3,615
======= ======= ======= ======= =======
Pro forma data:
Historical income (loss)
before income taxes.... $(1,741) $ 2,800 $ 5,567 $ 3,557 $5,917
------- ------- ------- ------- -------
Historical provision for
income taxes........... -- -- 1,891 1,087 2,302
Additional provision
(credit) for income
taxes.................. (87) 593 336 336 --
------- ------- ------- ------- -------
Pro forma income taxes.. (87) 593 2,227 1,423 2,302
------- ------- ------- ------- -------
Pro forma net income
(loss)................. $(1,654) $ 2,207 $ 3,340 $ 2,134 $ 3,615
======= ======= ======= ======= =======
Pro forma net income per
share.................. $ .44 $ .56 $ .36 $ .49
======= ======= ======= =======
Pro forma weighted
average number of
common and common
equivalent shares
outstanding............ 4,993 5,913 5,758 7,376
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
RENAISSANCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
WARRANTS UNREALIZED
ADDITIONAL TO ACQUIRE CUMULATIVE GAIN (LOSS) ON RETAINED STOCKHOLDERS'
NUMBER COMMON PAID IN COMMON TRANSLATION MARKETABLE EARNINGS EQUITY
OF SHARES STOCK CAPITAL STOCK ADJUSTMENTS SECURITIES (DEFICIT) (DEFICIENCY)
--------- ------ ---------- ---------- ----------- -------------- --------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1993................... 4,412,358 $ -- $ -- $ -- $ -- $ -- $ 214 $ 214
Net loss .............. (1,741) (1,741)
--------- ----- ------- ------ ----- ----- ------- -------
Balance at December 31,
1993................... 4,412,358 (1,527) (1,527)
Issuance of common
stock................. 155,038 1 1
Net income............. 2,800 2,800
--------- ----- ------- ------ ----- ----- ------- -------
Balance at December 31,
1994................... 4,567,396 1 1,273 1,274
Issuance of common
stock, net of related
issuance costs of
$1,291................ 1,400,000 1 15,635 15,636
Distributions to
shareholders.......... (3,426) (3,426)
Corporate
reorganization........ (1,315) 1,315 --
Sale of warrants to
acquire common stock.. 1,600 1,600
Exercise of stock
options............... 2,000 16 16
Translation adjustment. (46) (46)
Unrealized gain on
marketable securities. 35 35
Net income............. 3,676 3,676
--------- ----- ------- ------ ----- ----- ------- -------
Balance at December 31,
1995................... 5,969,396 $ 1 $14,337 $1,600 $ (46) $ 35 $ 2,838 $18,765
--------- ----- ------- ------ ----- ----- ------- -------
Issuance of common
stock, net of related
issuance costs of
$225.................. 902,125 28,263 28,263
Exercise of stock
options............... 121,642 1,215 1,215
Issuance of stock
through Employee Stock
Purchase
Plan.................. 42,155 607 607
Tax benefit from
exercise of stock
options............... 967 967
Translation adjustment. 13 13
Unrealized (loss) on
marketable securities. (18) (18)
Net income............. 3,615 3,615
--------- ----- ------- ------ ----- ----- ------- -------
Balance at September 27,
1996................... 7,035,318 $ 1 $45,389 $1,600 $ (33) $ 17 $ 6,453 $53,427
========= ===== ======= ====== ===== ===== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
RENAISSANCE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, NINE MONTHS ENDED
------------------------- ---------------------------
SEPTEMBER 29,
1995 SEPTEMBER 27,
1993 1994 1995 (UNAUDITED) 1996
------- ------- ------- ------------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss).......... $(1,741) $ 2,800 $ 3,676 $ 2,470 $ 3,615
Adjustments to reconcile
net income (loss) to net
cash provided by (used
for) operating activities:
Depreciation and
amortization............ 66 161 339 211 368
Change in:
Accounts receivable,
net................... (241) (1,796) (3,440) (4,143) (3,018)
Unbilled services, net. (161) (490) (2,920) -- 1,185
Receivable from
officers/shareholders. -- -- (278) -- 278
Prepaid expenses and
other................. (16) (25) (64) (131) (737)
Accounts payable....... 175 123 653 334 (511)
Accrued payroll and
related costs......... 118 502 96 289 939
Accrued income taxes... -- -- 270 216 (204)
Other accrued
liabilities........... 162 29 (83) (69) 206
Advance payments....... -- 983 (642) (837) (210)
Increase in other
liabilities........... -- -- 87 -- 74
------- ------- ------- ------- -------
Net cash provided by
(used for) operating
activities.............. (1,638) 2,287 (2,306) (1,660) 1,985
------- ------- ------- ------- -------
Cash flows from investing
activities:
Purchases of marketable
securities................ -- -- (4,855) -- (20,046)
Sales and maturities of
marketable securities..... -- -- -- -- 5,185
Expenditures for property
and equipment............. (331) (774) (1,391) (671) (323)
Increase in other assets... -- -- (72) -- --
------- ------- ------- ------- -------
Net cash used for
investing activities.... (331) (774) (6,318) (671) (15,184)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Issuance of common stock,
net....................... -- 1 15,652 12,208 30,085
Tax benefit from exercise
of stock options.......... -- -- -- -- 967
Sale of warrants to acquire
common stock.............. -- -- 1,600 1,600 --
Payment of shareholder
distributions............. -- -- (3,426) -- --
Short-term borrowings...... 1,415 370 1,500 500 (1,500)
Repayment of short-term
borrowings................ (1,380) (500) -- -- --
Proceeds from note
payable--Gemini........... 2,000 -- -- -- --
Payment of note payable--
Gemini.................... -- -- (2,000) (2,000) --
Repayment of loans from
officers.................. (121) -- -- -- --
------- ------- ------- ------- -------
Net cash provided by
(used for) financing
activities.............. 1,914 (129) 13,326 12,308 29,552
------- ------- ------- ------- -------
Effect of exchange rate
changes on cash and cash
equivalents................. -- -- (46) -- (13)
------- ------- ------- ------- -------
Increase (decrease) in cash
and cash equivalents........ (55) 1,384 4,656 9,977 16,340
Cash and cash equivalents,
beginning of period......... 55 -- 1,384 1,384 6,040
------- ------- ------- ------- -------
Cash and cash equivalents,
end of period............... $ -- $ 1,384 $ 6,040 $11,361 $22,380
======= ======= ======= ======= =======
Supplemental disclosure of
cash flow information:
Interest paid.............. $ 31 $ 97 $ 74 $ 88 $ 47
======= ======= ======= ======= =======
Income taxes paid.......... $ -- $ 2 $ 1,620 $ 870 $ 1,541
======= ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
1. REORGANIZATION AND BASIS OF PRESENTATION
Renaissance Solutions, Inc. ("Renaissance" or the "Company") was organized
as a Delaware corporation in March 1992. In December 1993, the Company
contributed all of its assets, subject to all of its liabilities, to
Renaissance Strategy Group Limited Partnership, a Delaware limited partnership
(the "Partnership"), in exchange for the sole general partnership interest in
the Partnership. The business of the Company was conducted by the Partnership
from December 1, 1993 to April 3, 1995. Pursuant to a reorganization agreement
(the "Reorganization Agreement") entered into among the Company, the
Partnership, the limited partners of the Partnership, the holders of certain
units of economic interest ("Units") in the Partnership and the holders of
certain options to purchase Units, effective April 3, 1995 (i) the Company
issued 4,567,396 shares of its Common Stock in exchange for all of the
outstanding limited partnership interests and Units in the Partnership, and
(ii) options to purchase 1,730,000 Units outstanding as of such date were
exchanged for options to purchase 432,605 shares of Common Stock. Immediately
thereafter, the Partnership was dissolved and all of its assets and
liabilities were distributed to and assumed by the Company. The reorganization
of the Company described above is referred to herein as the "Reorganization."
The Reorganization has been accounted for in a manner similar to a pooling of
interests and, except as otherwise indicated or where the context otherwise
requires, the information set forth in these financial statements has been
adjusted to give retroactive effect to the Reorganization. References herein
to the "Company" and "Renaissance" refer to Renaissance Solutions, Inc. and,
with respect to operations between December 1, 1993 and April 3, 1995 (the
date of the Reorganization), the Partnership, and its wholly-owned
subsidiaries, Renaissance Solutions Limited and Renaissance Securities Corp.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company provides management consulting and client/server systems
integration services, primarily for large corporations.
Fiscal Years and Quarters
The Company's fiscal year ends on December 31. For quarterly reporting
purposes, the Company uses a thirteen week accounting period.
Interim Results (Unaudited)
In the opinion of management, the accompanying interim unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and operating results for the interim
periods.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Revenue Recognition
The Company currently derives most of its revenues from professional service
activities. Revenues on service contracts are recorded under the percentage of
completion method based upon the number of labor hours incurred compared to
the total estimated hours at estimated realizable rates. Provisions are made
for estimated unbillable and uncollectible amounts. Revenues are reported net
of reimbursable expenses which are billed and collected from clients.
Reimbursable expenses were approximately $396, $1,477 and $2,247 for the years
ended December 31, 1993, 1994 and 1995, respectively, and $1,725 and $2,653
for the periods ended September 29, 1995 and September 27, 1996, respectively.
When billings exceed revenues earned and/or expenses incurred, the excess is
recorded as advance payments.
In September 1996, Gemini satisfied a bookings deficiency under the Teaming
Agreement (Note 7) by making a cash payment of $750 which has been included in
revenues for the nine months ended September 27, 1996.
Research and Development Costs
Research and development costs are expensed as incurred. For the years ended
December 31, 1993, 1994 and 1995, and for the period ended September 27, 1996,
the Company did not incur material research and development costs.
Property and Equipment
Property and equipment are stated at cost. Major additions and improvements
are capitalized, while repairs and maintenance are charged to expense.
Depreciation is computed using straight-line methods over the estimated
useful lives of the assets as follows:
<TABLE>
<CAPTION>
DESCRIPTION ESTIMATED USEFUL LIFE
----------- ---------------------
<S> <C>
Computer hardware and software...................... 5 Years
Furniture and fixtures.............................. 7 Years
Leasehold improvements.............................. 10 Years
</TABLE>
Income Taxes
From its inception in 1992 to immediately prior to April 3, 1995 (the date
of its Reorganization), the Company was either an S corporation or a limited
partnership for federal income tax reporting purposes, and the taxable income
of the Company for that period was reportable by and taxable directly to the
Company's stockholders or partners rather than to the Company. During the
period commencing on March 23, 1992 and ending on December 1, 1993, the
Company operated as an S corporation. From December 1, 1993 through April 3,
1995, the Company operated as a limited partnership. Accordingly, no federal
or state income tax provision was required for the Company for the years ended
December 31, 1993 and 1994, and through the date of the Reorganization.
F-8
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Effective with the closing of the Company's initial public offering, the
Company has been subject to federal and state income taxes as a C corporation.
Effective with its inception, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). SFAS 109 utilizes the liability method, and deferred taxes
are determined based on the estimated future tax effects of differences
between financial statement and tax bases of assets and liabilities given the
provisions of the enacted tax laws.
Foreign Currency Translation
The functional currency for the Company's U.K. subsidiary, Renaissance
Solutions Limited, is the British pound. Assets and liabilities are translated
at period-end rates of exchange, and income and expenses are translated at
average rates of exchange for the period. The resulting translation
adjustments are excluded from net earnings and accumulated as a separate
component of stockholders' equity. Gains and losses from foreign currency
transactions are not material and are reflected in net income.
Income Per Share
Pro forma income per share is based on the weighted average number of common
and dilutive common equivalent shares (common stock options) outstanding. The
pro forma weighted average number of common shares assumes that 10,002 shares
of common stock issued in March 1994 and all stock options granted in January
1995 and March 1995 were outstanding for all periods presented. Common
equivalent shares are not included in the per share calculations where the
effect of their inclusion would be anti-dilutive, except in accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83. The
Bulletin requires that all common shares issued and options to purchase shares
of common stock granted by the Company during the twelve-month period prior to
filing of a proposed initial public offering be included in the calculation as
if they were outstanding for all periods. The pro forma weighted average
number of common shares for 1994 and through April 11, 1995 also assumes that
approximately 300,000 shares of the 1,400,000 shares issued in the Company's
initial public offering, the proceeds of which were used to repay stockholder
notes totaling approximately $3,426 (see Note 8), were outstanding.
Cash Flow Information
The Company considers all bank deposits and short-term investments having
original maturities of ninety days or less to be cash and cash equivalents.
Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" ("SFAS 121") in the period ended September 27, 1996. SFAS
121 establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets. There
was no effect of adoption of SFAS 121 on the financial statements.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123") became effective in 1996. As permitted by
SFAS 123, the Company has elected to continue to
F-9
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
account for stock-based compensation to employees under APB Opinion No. 25 and
to provide the SFAS 123 required disclosures in its 1996 annual financial
statements.
3. ACCOUNTS RECEIVABLE AND UNBILLED SERVICES
Accounts receivable and unbilled services consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 27,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Billed............................................ $2,589 $5,901 $ 8,990
Unbilled services................................. 874 4,085 2,737
Allowance for uncollectible accounts.............. (273) (436) (344)
------ ------ -------
Accounts receivable and unbilled services, net.... $3,190 $9,550 $11,383
====== ====== =======
</TABLE>
Provisions for uncollectible accounts charged to expense were $103, $256 and
$242 in 1993, 1994 and 1995, respectively, and $303 and $219 for the periods
ended September 29, 1995 and September 27, 1996, respectively. Write-offs of
uncollectible accounts amounted to $99 and $79 for the years ended December
31, 1994 and 1995, respectively. Write-offs of uncollectible accounts during
the periods ended September 29, 1995 and September 27, 1996 were $59 and $312,
respectively.
4. MARKETABLE SECURITIES
Marketable securities are classified as available for sale and consist of
U.S. Treasury Notes, Federal Agency Bonds and Corporate Bonds having maturity
dates of more than three months and are stated at fair value. Aggregate net
unrealized holding gains of $35 and $17 at December 31, 1995 and September 27,
1996, respectively, have been included as a separate component of
stockholders' equity in the accompanying balance sheets. Certain information
with respect to the Company's marketable securities as of December 31, 1995
and September 27, 1996 is presented below.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
SECURITY TYPE COST HOLDING GAINS HOLDING LOSSES VALUE
- ------------- --------- ------------- -------------- ------
<S> <C> <C> <C> <C>
U.S. Treasury Notes............... $3,604 $31 $ -- $3,635
Federal Agency Bonds.............. 1,251 5 1 1,255
------ --- ----- ------
$4,855 $36 $ 1 $4,890
====== === ===== ======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 27, 1996
----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
SECURITY TYPE COST HOLDING GAINS HOLDING LOSSES VALUE
- ------------- --------- ------------- -------------- -------
<S> <C> <C> <C> <C>
U.S. Treasury Notes.............. $11,687 $18 $ -- $11,705
Federal Agency Bonds............. 4,846 26 -- 4,872
Corporate Bonds.................. 3,219 -- 27 3,192
------- --- ----- -------
$19,752 $44 $ 27 $19,769
======= === ===== =======
</TABLE>
The fair value of marketable securities, by contractual maturity, are shown
below. Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations without call or
prepayment penalties.
F-10
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 27,
1995 1996
------------ -------------
<S> <C> <C>
Due in one year or less.............................. $1,105 $ 6,958
Due after one through three years.................... 3,785 12,811
------ -------
Total.............................................. $4,890 $19,769
====== =======
</TABLE>
There were no sales or maturities of securities during the year ended
December 31, 1995. Sales of marketable securities totalled $3,553 during the
period ended September 27, 1996.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 27,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Computer hardware and software.................... $ 799 $1,506 $1,110
Furniture and fixtures............................ 276 653 975
Equipment......................................... 123 247 282
Leasehold improvements............................ 2 177 293
------ ------ ------
1,200 2,583 2,660
Less accumulated depreciation..................... (218) (549) (681)
------ ------ ------
Property and equipment, net....................... $ 982 $2,034 $1,979
====== ====== ======
</TABLE>
6. LINE-OF-CREDIT--BANK
At September 27, 1996, the Company had a $3,500 unsecured revolving line of
credit agreement with a bank, expiring on June 1, 1997. Interest is payable at
the bank's corporate rate (8.50% at December 31, 1995). The loan agreement
includes various customary financial and other covenants including maintenance
of minimum levels of tangible net worth and quarterly profitability.
Borrowings outstanding under the line were $1,500 at December 31, 1995. No
borrowings were outstanding under the line as of September 27, 1996.
The Company had a British Pound Sterling 420 ($655) revolving line of credit
with a U.K. bank, at September 27, 1996. There were no borrowings outstanding
under this line at December 31, 1995 or September 27, 1996.
7. GEMINI RELATIONSHIP
Teaming Agreement (See Note 13)
The Company has entered into a Teaming Agreement dated as of October 17,
1994 (the "Teaming Agreement") with Gemini Consulting, Inc. ("Gemini")
pursuant to which the Company and Gemini have agreed to market and perform
certain service offerings on a collaborative basis. Approximately 79%, 54% and
43% of the Company's revenues in 1994 and 1995 and the period ended September
27, 1996 resulted from its relationship with Gemini; approximately 65%, 24%
and 27% of revenues were from services and other amounts billable to Gemini
and approximately 14%, 30% and 16% of revenues were from services billable
directly to third parties. Gemini has committed to provide the Company with
certain minimum bookings during the three-year term of the Teaming Agreement,
commencing November 1, 1994, subject to the satisfaction of certain
conditions.
F-11
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Since the inception of the Teaming Agreement, Gemini has not met certain of
the minimum bookings commitments. In accordance with the Teaming Agreement,
Gemini has satisfied these bookings deficiencies through a combination of
revenues generated from client work referred to the Company, work performed by
the Company as a subcontractor for Gemini, work performed by the Company
directly for Gemini, the acquisition by Gemini from the Company for $2,200 of
certain Company program designs and related materials and, in September 1996,
a cash payment of $750. The $2,200 and $750 are included in revenue for the
nine months ended September 27, 1996.
As part of the Teaming Agreement, the Company has agreed to train Gemini
personnel in the use of the "Balanced Scorecard" and certain of the Company's
other consulting methodologies during the first four years of the term of the
Teaming Agreement and to license these methodologies, to the extent developed
during the first four years of the term of the Teaming Agreement, to Gemini on
a non-exclusive basis. In exchange, Gemini has agreed to pay the Company an
annual fee of $2,000 in each of the first three years of the term of the
Teaming Agreement. Revenues are being recognized as the services are performed
over the first four years of the term of the Teaming Agreement. The Company is
also obligated to pay Gemini an annual fee of $400 in each of the first three
years of the term of the Teaming Agreement for certain training services to be
provided by Gemini to Renaissance personnel during that period.
Pursuant to the Teaming Agreement, Renaissance has agreed not to work for or
enter into any comparable teaming agreement with certain specified competitors
of Gemini during the term of the Teaming Agreement and for a period of one
year thereafter. In addition, the Teaming Agreement imposes certain
restrictions on the ability of the Company to issue additional capital stock
and on the ability of the Company's principal stockholders to dispose of their
Common Stock. The Teaming Agreement is subject to earlier termination upon the
occurrence of certain events.
On February 14, 1995, the Company and Gemini amended the Teaming Agreement
to extend the term of the Teaming Agreement from three years to five years. In
the event that the Teaming Agreement is terminated by Gemini during the first
four years following the commencement of the Teaming Agreement as a result of
the Company's breach or bankruptcy or as a result of a change in control of
the Company, Renaissance is required to pay a termination fee to Gemini in the
amount of $1,600.
Simultaneously with the closing of the Company's initial public offering on
April 11, 1995, Messrs. Harry Lasker and David Lubin and Ms. Melissa Norton,
the wife of David Norton (the "Principal Stockholders"), sold to Gemini
options for the purchase of 150,000 shares of Common Stock (the "Gemini
Options") for an aggregate purchase price of $675. Each Principal Stockholder
sold to Gemini an option for up to 50,000 shares of Common Stock at an
exercise price equal to $13.00 per share. The Gemini Options are transferable
and are exercisable during the four year period commencing on April 11, 1996,
provided that in no event may the Gemini Options be exercised unless and until
Gemini ceases to be subject to, or obtains a waiver of, certain regulatory and
contractual restrictions which prohibit Gemini from owning more than 4.9% of
the Company. Gemini is entitled to registration rights with respect to the
Common Stock deliverable upon exercise of the Gemini Options, and paid the
purchase price for the Gemini Options by the delivery of promissory notes to
the Principal Stockholders (the "Gemini Option Notes"). The Gemini Option
Notes bear interest at a floating rate equal to the prime rate published from
time to time in The Wall Street Journal and are payable upon the first to
occur of the exercise of the Gemini Options or April 11, 2000.
F-12
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Note Payable
At December 31, 1994, Gemini had advanced the Company $2,000 for working
capital purposes. Under a revised promissory note dated January 17, 1995,
interest was payable at The Wall Street Journal prime rate plus 2%. The note
was repaid in full during 1995.
8. STOCKHOLDERS' EQUITY
Initial Public Offering
On April 11, 1995, the Company completed its initial public offering of
Common Stock, whereby the Company issued 1,400,000 shares of Common Stock and
an additional 885,000 shares were sold by existing stockholders of the
Company. The net proceeds from the sale of the shares by the Company were
approximately $15,636 after deducting offering expenses of $1,291.
Approximately $1,872 of the net proceeds of the offering were used to repay a
note due to Gemini Consulting, Inc. and $3,426 of the net proceeds were used
to repay notes payable to the Company's stockholders incurred by the Company
in connection with the payment of partnership distributions in January and
March 1995. Simultaneously with the closing of the offering the Company also
sold warrants to Gemini to acquire 633,600 shares of the Company's Common
Stock for cash of $1,600.
Follow-on Offering
On May 17, 1996, the Company completed a follow-on public offering, whereby
the Company issued 902,125 shares of Common Stock and existing shareholders
sold 647,500 shares of Common Stock. The net proceeds from the sale of shares
by the Company were approximately $28,263, after deducting offering expenses
of $225.
Preferred Stock
Authorized preferred stock consists of 2,000,000 shares, $.01 par value per
share. The Board of Directors is authorized, without shareholder approval, to
issue such shares of preferred stock in one or more series, with such rights,
preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences,
as the Board of Directors may determine.
1995 Equity Incentive Plan
In January 1995, the Board of Directors adopted and the stockholders
approved the 1995 Equity Incentive Plan (the "Equity Plan"). Under the terms
of the Equity Plan, the Company is authorized to make awards of restricted
stock and to grant incentive and non-statutory options to employees of, and
consultants and advisors to, the Company to purchase shares of the Common
Stock of the Company. A total of 1,100,000 shares of Common Stock may be
issued upon exercise of options granted or awards made under the Equity Plan.
Options granted through December 31, 1995 generally vest in five equal annual
installments commencing on the first anniversary of the optionee's date of
hire.
On September 18, 1996, the Board of Directors adopted, subject to
stockholder approval, an amendment to the Company's 1995 Equity Incentive Plan
increasing the number of shares of Common Stock available for issuance under
the Plan from 1,100,000 to 2,100,000.
1995 Director Stock Option Plan
In January 1995, the Board of Directors also adopted and the stockholders
approved the 1995 Director Stock Option Plan (the "Director Plan"), which
became effective on the closing of the Company's initial public offering.
Under the terms of the Director Plan, directors of the Company who are not
employees of the
F-13
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Company or any subsidiary of the Company are eligible to receive non-statutory
options to purchase shares of Common Stock. A total of 50,000 shares of Common
Stock may be issued upon exercise of options granted under the Director Plan.
Options to purchase 25,000 shares of Common Stock have been granted to the two
eligible directors. The exercise price of options granted under the Director
Plan is equal to the closing price of the Common Stock on the date of grant.
A summary of activity under the Equity Plan and the Director Plan is as
follows:
<TABLE>
<CAPTION>
OPTION OPTION PRICE OPTIONS
SHARES PER SHARE EXERCISABLE
-------- ------------- -----------
<S> <C> <C> <C>
Outstanding at December 31, 1994....... -- --
Granted................................ 744,218 $8.00-$22.75
Exercised.............................. (2,000) $8.00
Cancelled/expired...................... (2,900) --
--------
Outstanding at December 31, 1995....... 739,318 $8.00-$22.75 56,513
Granted................................ 406,500 $14.25-$39.25
Exercised.............................. (121,642) $ 8.00-$20.00
Cancelled/expired...................... (61,422) $ 8.00-$20.00
--------
Outstanding at September 27, 1996...... 962,754 109,719
======== =======
</TABLE>
1995 Employee Stock Purchase Plan
In January 1995, the Board of Directors also adopted and the shareholders
approved the 1995 Employee Stock Purchase Plan (the "Purchase Plan"), which
became effective on the closing of the Company's initial public offering. The
Purchase Plan authorizes the issuance of up to a total of 450,000 shares of
Common Stock to participating employees. Under the terms of the Purchase Plan,
the purchase price is an amount equal to 85% of the fair market value per
share of the Common Stock on either the first day or the last day of the
offering period, whichever is lower. There were no shares acquired under the
Purchase Plan during the year ended December 31, 1995. There were 42,155
shares purchased under the plan during the nine month period ended September
27, 1996.
Gemini Warrants
The Company sold two warrants (together, the "Gemini Warrants") to Gemini
upon the closing of the Company's initial public offering for an aggregate
purchase price of $1,600. One warrant is exercisable through April 11, 1998
for up to 313,600 shares of Common Stock at an exercise price equal to $13.00
per share. The second warrant is exercisable through November 1, 1999 for up
to 320,000 shares of Common Stock at an exercise price equal to $19.50 per
share. Gemini is entitled to registration rights with respect to the Common
Stock issuable upon exercise of the Gemini Warrants.
Partnership Distributions
In January and March 1995, the Partnership declared and made partnership
distributions totalling $3,426 evidenced by delivery of the Company's
promissory notes which were paid with proceeds from the Company's initial
public offering. Distributions in excess of earnings were reclassified to paid
in capital pursuant to Securities and Exchange Commission Staff Accounting
Bulletin Topic 4:B.
F-14
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
9. INCOME TAXES
The provision (credit) for income taxes on a pro forma basis is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1993 1994 1995
----- ----- ------
<S> <C> <C> <C>
Current taxes:
Federal................................................. $ -- $ 453 $1,665
State................................................... -- 140 562
----- ----- ------
Total current......................................... -- 593 2,227
----- ----- ------
Deferred taxes:
Federal................................................. (589) (95) --
State................................................... (104) (17) --
Change in valuation allowance........................... 606 (570) --
----- ----- ------
Total deferred........................................ (87) (682) --
----- ----- ------
Tax benefit of loss carryforward.......................... -- 682 --
----- ----- ------
Total provision....................................... $ (87) $ 593 $2,227
===== ===== ======
</TABLE>
Effective with the closing of the Company's initial public offering, the
Company's S corporation election was automatically terminated. The cumulative
effect at December 31, 1995 of temporary differences between financial
accounting and income tax reporting was not material.
The reconciliation of the Company's pro forma income tax provision to the
statutory federal tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1993 1994 1995
----- ----- ----
<S> <C> <C> <C>
Statutory tax rate......................................... (34.0)% 34.0% 34.0%
State income taxes--net of federal benefit................. (6.0) 6.0 6.0
Change in valuation allowance.............................. 34.8 (20.4) --
Other...................................................... 0.2 1.6 --
----- ----- ----
Effective income tax rate.................................. (5.0)% 21.2% 40.0%
===== ===== ====
</TABLE>
The tax provision for the period ended September 27, 1996 is based upon the
estimated effective tax rate of 39% for the entire fiscal year. As of December
31, 1995, the Company had no net operating loss carryforwards.
10. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company is obligated under a lease for office space and several
equipment and service leases through 2002. The current office space is being
sublet by the Company from another party. The amended office lease provides
for increases in rental payments over the life of the lease. Rent expense is
being
F-15
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
recognized on a straight-line basis over the term of the lease. The Company is
also required to pay a pro rata share of common area maintenance charges.
Total rent expense under all operating leases for the years ended December 31,
1993, 1994 and 1995 was $159, $245 and $601, respectively.
Future minimum payments under the office space and equipment leases at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
OFFICE EQUIPMENT TOTAL
------ --------- ------
<S> <C> <C> <C>
1996.................................................... $1,056 $ 43 $1,099
1997.................................................... 1,104 42 1,146
1998.................................................... 1,144 36 1,180
1999.................................................... 1,053 17 1,070
2000.................................................... 189 -- 189
Thereafter.............................................. 412 -- 412
------ ---- ------
$4,958 $138 $5,096
====== ==== ======
</TABLE>
In August 1996, the Company entered into a sale leaseback transaction for
certain equipment, services and support. Under this operating lease, the
Company will pay approximately $407, $1,200, $1,200 and $866 in 1996, 1997,
1998 and 1999, respectively.
Employment Agreements
In connection with the Reorganization, the Company entered into employment
agreements with its two co-chairmen and the president and chief executive
officer (the "Employment Agreements"). Each Employment Agreement provides for
a term of two years and an initial annual base salary of $500. Effective July
1, 1996, the Board amended the Employment Agreements to provide for a base
salary of $375. Each Employment Agreement provides that the officer will be
eligible for bonuses at the discretion of the Board of Directors if the
officer satisfies targeted performance objectives. In January 1995, the
Company entered into employment agreements (the "Executive Agreements") with
its executive vice president, senior vice president and chief financial and
operating officer which provide annual salaries of $375, $300 and $250,
respectively. Each Executive Agreement may be terminated upon 30 days' written
notice by either party.
Receivable from officers/shareholders at December 31, 1995 included $150 of
aggregate 1995 salary foregone by the Company's two co-chairmen and the
president and chief executive officer and $100 of excess premiums for
directors and officers liability insurance purchased by the Company at the
request and expense of such officers. The receivable was collected in 1996.
11. BUSINESS SEGMENT INFORMATION
The Company operates in one business segment.
Geographic Information
Revenues of the Company's U.K. subsidiary totalled approximately $2,691, or
12% of consolidated 1995 revenues, and $1,255, or 17% of consolidated revenues
for the period ended September 27, 1996. Income from operations for the
Company's U.K. subsidiary for the year ended December 31, 1995 and the nine
months ended September 27, 1996 was $591 and $12, respectively, and
identifiable assets at December 31,
F-16
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
1995 and September 27, 1996 were $879 and $751, respectively. The Company's
U.K. subsidiary had no material operations in 1994. Revenues from customers
outside of North America, primarily in the United Kingdom, accounted for
approximately 16%, 8% and 16% of total revenues for the year ended December
31, 1993, 1994 and 1995, respectively, and 34% and 14% for the nine months
ended September 29, 1995 and September 27, 1996, respectively.
Major Customer and Credit Concentration Information
Revenues from certain of the Company's largest customers individually
exceeded 10% of revenues as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------- SEPTEMBER 27,
CUSTOMER 1993 1994 1995 1996
-------- ------- ------- ------- -------------
<S> <C> <C> <C> <C>
A............................. 24% 65%* 24% 27%
B............................. 14 36 46
C............................. 12
D............................. 12
E............................. 18
F............................. 14
G............................. 16
</TABLE>
- --------
* 45% of total revenues in 1994 were from services provided by the Company to
Customer C as a subcontractor of Customer A.
The Company's customers are principally large corporations from whom the
Company does not require collateral. The Company has not experienced
significant losses related to receivables from individual customers or groups
of customers in a particular industry or geographic area. The Company
maintains reserves for potential credit losses which to date have not been
significant.
12. 401(K) PROFIT-SHARING PLAN
The Company has a 401(k) profit-sharing plan (the "Plan") established in
1994 and covering substantially all domestic employees. The Plan allows each
participant to defer up to 20% of annual earnings up to an amount not to
exceed an annual statutory maximum. Subject to the approval of the Board of
Directors on an annual basis, the Company may make profit-sharing
contributions and/or match employee deferrals. For the years ended December
31, 1994 and 1995, the Company's contributions totalled $14 and $25,
respectively.
13. SUBSEQUENT EVENTS
The Company and Gemini have entered into a Third Amended and Restated
Teaming Agreement (the "Restated Teaming Agreement") to be effective upon the
closing of the offering contemplated by this Prospectus (the "Offering"). The
Restated Teaming Agreement would supersede the prior Teaming Agreement (Note
7).
In general, the Restated Teaming Agreement provides for a reduction by 50%
in Gemini's minimum bookings commitments for the twelve month periods ended
October 31, 1997, 1998 and 1999 and the elimination of various contractual
covenants in favor of Gemini, including non-competition restrictions, rights
of first refusal, rights of first offer and limitations on issuances and
transfers of securities by the Company and the founders of the Company and
their affiliates, which were previously set forth in the Teaming Agreement.
F-17
<PAGE>
RENAISSANCE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 29, 1995 IS
UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The Restated Teaming Agreement also provides for a reduction in the termination
fee payable by the Company in the event of a valid termination of the agreement
by either party and for the payment of certain license fees by Gemini to the
Company in five equal installments of $1,000 during the period commencing on
the date of the closing of the Offering and ending on November 1, 1998.
In the event that during any of the six month periods during the term of the
Restated Teaming Agreement bookings obtained by the Company from Gemini
customers or customers of joint service offerings by the Company and Gemini are
less than the specified minimum bookings, Gemini may retain the services of the
Company for a fee equal to the amount of the deficiency. If at the end of
twelve months a bookings deficiency still remains, Gemini is required to make a
compensating payment to the Company of 25% of the remaining deficiency in full
satisfaction of the bookings deficiency. In no event will Gemini be obligated
to make a payment with respect to any bookings deficiency in an amount in
excess of 25% of such deficiency.
During the six month period commenced on May 1, 1996 and ending on October
31, 1996, Gemini's bookings commitment to the Company is $8,000. Approximately
$4,000 in revenues generated from the estimated $5,000 in bookings in this six
month period will be applied to satisfy the prior period deficiency. The
Company and Gemini have agreed that Gemini will satisfy the bookings deficiency
for this period with a one time payment by Gemini to the Company of
approximately $1,600 (subject to adjustment in accordance with the terms of the
Restated Teaming Agreement), to be made simultaneously with the closing of the
Offering.
F-18
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH A SOLICITATION OR OFFER. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information..................................................... 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 5
Recent Developments........................................................ 10
The Company................................................................ 10
Use of Proceeds............................................................ 11
Price Range of Common Stock................................................ 11
Capitalization............................................................. 12
Selected Consolidated Financial Data....................................... 13
Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................................................ 14
Business................................................................... 20
Management................................................................. 28
Principal and Selling Stockholders......................................... 30
Underwriting............................................................... 32
Legal Matters.............................................................. 33
Experts.................................................................... 33
Index to Consolidated Financial Statements................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,100,000 SHARES
RENAISSANCE SOLUTIONS, INC.
COMMON STOCK
-------------
PROSPECTUS
-------------
HAMBRECHT & QUIST
COWEN & COMPANY
ROBERTSON, STEPHENS & COMPANY
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discount. All amounts shown are estimates except for the
Securities and Exchange Commission registration fee and the NASD filing fee.
Of these expenses $303,000 will be paid by the Registrant and $97,000 will be
paid by certain Selling Stockholders.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 14,615
NASD Filing Fee................................................. 5,323
Nasdaq Listing Fee.............................................. 1,003
Blue Sky Fees and Expenses...................................... 15,000
Transfer Agent and Registrar Fees............................... 5,000
Accounting Fees and Expenses.................................... 125,000
Legal Fees and Expenses......................................... 100,000
Printing, Engraving and Mailing Expenses........................ 75,000
Miscellaneous................................................... 59,059
--------
Total......................................................... $400,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article EIGHTH of the Registrant's Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") provides that no
director of the Registrant shall be personally liable for any monetary damages
for any breach of fiduciary duty as a director, except to the extent that the
Delaware General Corporation Law prohibits the elimination or limitation of
liability of directors for breach of fiduciary duty.
Article NINTH of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any
litigation or other legal proceeding (other than an action by or in the right
of the Registrant) brought against him by virtue of his position as a director
or officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests
of the Registrant, except that no indemnification shall be made with respect
to any matter as to which such person shall have been adjudged to be liable to
the Registrant, unless a court determines that, despite such adjudication but
in view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.
Indemnification is required to be made unless the Registrant determines that
the applicable standard of conduct required for indemnification has not been
met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether
II-1
<PAGE>
such person is entitled to indemnification. As a condition precedent to the
right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article NINTH of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive,
and provides that in the event that the Delaware General Corporation Law is
amended to expand the indemnification permitted to directors or officers the
Registrant must indemnify those persons to the fullest extent permitted by
such law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred
in connection with an action or proceeding to which he is or is threatened to
be made a party by reason of such position, if such person shall have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal proceeding, if
such person had no reasonable cause to believe his conduct was unlawful;
provided that, in the case of actions brought by or in the right of the
corporation, no indemnification shall be made with respect to any matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
Under Section 7 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed
as Exhibit 1 hereto.
The Company maintains a general liability insurance policy which covers
certain liabilities of directors and officers of the Company arising out of
claims based on acts or omissions in their capacities as directors or
officers.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation of the Registrant,
as amended.
*3.2 By-Laws of the Registrant.
5 Opinion of Hale and Dorr with respect to the validity of the
securities being offered.
23.1 Consent of Hale and Dorr (included in Exhibit 5).
23.2 Consent of Deloitte & Touche LLP.
24 Power of Attorney (included on signature page).
</TABLE>
- ---------------------
*Incorporated by reference to the Registrant's Registration Statement on Form
S-1, File No. 33-89524.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Restated Certificate of
Incorporation and Amended and Restated By-Laws of the Registrant and the laws
of the State of Delaware, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Lincoln, Commonwealth of
Massachusetts, on this 24th day of October, 1996.
Renaissance Solutions, Inc.
/s/ David P. Norton
By: __________________________________
DAVID P. NORTONPRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Renaissance Solutions, Inc.,
hereby severally constitute and appoint Harry M. Lasker, David A. Lubin, David
P. Norton, David E. Redlick and Hal J. Leibowitz, and each of them singly, our
true and lawful attorneys with full power to them, and each of them singly, to
sign for us and in our names in the capacities indicated below, the
Registration Statement on Form S-3 filed herewith, and any and all pre-
effective and post-effective amendments to said Registration Statement, and
any subsequent Registration Statement for the same offering which may be filed
under Rule 462(b), and generally to do all such things in our names and on our
behalf in our capacities as officers and directors to enable Renaissance
Solutions, Inc. to comply with the provisions of the Securities Act of 1933,
as amended, and all requirements of the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by our
said attorneys, or any of them, to said Registration Statement and any and all
amendments thereto or to any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated below on the 24th day of October, 1996.
SIGNATURE TITLE
/s/ David P. Norton President, Chief Executive Officer
- ----------------------------------- and Director (Principal Executive
DAVID P. NORTON Officer)
/s/ George A. McMillan Vice President, Chief Financial
- ----------------------------------- Officer and Chief Operating Officer
GEORGE A. MCMILLAN (Principal Financial and Accounting
Officer)
/s/ Harry M. Lasker Director
- -----------------------------------
HARRY M. LASKER
II-4
<PAGE>
SIGNATURE TITLE
/s/ David A. Lubin Director
- ------------------------------------
DAVID A. LUBIN
/s/ Robert S. Kaplan Director
- ------------------------------------
ROBERT S. KAPLAN
/s/ John F. Rockart Director
- ------------------------------------
JOHN F. ROCKART
II-5
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation of the
Registrant, as amended.
*3.2 By-Laws of the Registrant.
5 Opinion of Hale and Dorr with respect to the validity of the
securities being offered.
23.1 Consent of Hale and Dorr (included in Exhibit 5).
23.2 Consent of Deloitte & Touche LLP.
24 Power of Attorney (included on signature page).
</TABLE>
- ---------------------
*Incorporated by reference to the Registrant's Registration Statement on Form
S-1, File No. 33-89524.
<PAGE>
Draft of 10/25/96
RENAISSANCE SOLUTIONS, INC.
1,100,000 Shares*
Common Stock
UNDERWRITING AGREEMENT
----------------------
______________, 1996
HAMBRECHT & QUIST LLC
COWEN & COMPANY
ROBERTSON, STEPHENS & COMPANY LLC
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
Renaissance Solutions, Inc., a Delaware corporation (herein called the
Company), proposes to issue and sell 50,150 shares of its authorized but
unissued Common Stock, $.0001 par value (herein called the Common Stock), and
the stockholders of the Company named in Schedule II hereto (herein collectively
called the Selling Stockholders) propose to sell an aggregate of 1,049,850
shares of Common Stock (said 1,100,000 shares of Common Stock being herein
called the Underwritten Stock). The Company proposes to grant to the
Underwriters (as hereinafter defined) an option to purchase up to 165,000
additional shares of Common Stock (said 165,000 shares of Common Stock being
herein called the Option Stock and, with the Underwritten Stock, collectively
called the Stock). The Common Stock is more fully described in the Registration
Statement and the Prospectus hereinafter mentioned.
The Company and the Selling Stockholders severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
and warrant that you have been authorized by each of the other Underwriters to
enter into this Agreement on its behalf and to act for it in the manner herein
provided.
1. Registration Statement. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-3 (No. 333-______), including the related preliminary prospectus, for the
registration of the Stock under the Securities Act of 1933, as amended (herein
called the Securities Act). Copies of such registration statement and of each
amendment thereto, if any, including the related preliminary prospectus (meeting
the requirements of
- ---------------
* Plus an option to purchase from the Company up to 165,000 additional shares
to cover over-allotments.
<PAGE>
Rule 430A of the rules and regulations of the Commission), heretofore filed by
the Company with the Commission have been delivered to you.
The term Registration Statement as used in this Agreement shall mean such
registration statement, including all documents incorporated by reference
therein, all exhibits and financial statements and all information omitted
therefrom in reliance upon Rule 430A and contained in the Prospectus referred to
below, in the form in which it became effective, and any registration statement
filed pursuant to Rule 462(b) of the rules and regulations of the Commission
with respect to the Stock (herein called a Rule 462(b) Registration Statement),
and, in the event of any amendment thereto after the effective date of such
registration statement (herein called the Effective Date), shall also mean (from
and after the effectiveness of such amendment) such registration statement as so
amended (including any Rule 462(b) Registration Statement). The term Prospectus
as used in this Agreement shall mean the prospectus, including all documents
incorporated by reference therein, relating to the Stock first filed with the
Commission pursuant to Rules 424(b) and 430A of the rules and regulations of the
Commission (or if no such filing is required, as included in the Registration
Statement) and, in the event of any supplement or amendment to such prospectus
after the Effective Date, shall also mean (from and after the filing with the
Commission of such supplement or the effectiveness of such amendment) such
prospectus as so supplemented or amended. The term Preliminary Prospectus as
used in this Agreement shall mean each preliminary prospectus, including all
documents incorporated by reference therein, included in such registration
statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.
2. Representations and Warranties of the Company and the Selling
Stockholders.
(a) The Company and each of Harry M. Lasker, Harry M. Lasker Children's
Trust, David A. Lubin, David A. Lubin Children's Trust and Melissa E. Norton
(collectively, the "Principals") severally hereby represents and warrants to the
Underwriters as follows:
(i) The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than Renaissance Solutions
Limited and Renaissance Securities Corp. (herein called the Subsidiaries). Each
of the Company and the Subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement
and the Prospectus and as being conducted, and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which the character of
the property owned or leased or the nature of the business transacted by it
makes qualification necessary (except where the failure to be so qualified would
not have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and the Subsidiaries, taken as
a whole (herein called a Material Adverse Effect)). Each of the Company and the
Subsidiaries now holds, and at the Closing Date (as hereinafter defined) will
hold, all licenses, permits and certificates from state, federal and other
regulatory authorities which are necessary for the conduct of the business of
the Company and the Subsidiaries, taken as a whole, except to the extent that
the failure to hold any such licenses, permits and certificates would not,
singly or in the aggregate, have a Material Adverse Effect.
(ii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any materially
adverse change in the business, properties, financial
2
<PAGE>
condition or results of operations of the Company and the Subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary course of
business, other than as disclosed in or specifically contemplated by the
Registration Statement and the Prospectus. Since such dates, except in the
ordinary course of business, neither the Company nor either of the Subsidiaries
has entered into any transaction material to the business of the Company and the
Subsidiaries, taken as a whole, not disclosed in or specifically contemplated by
the Registration Statement and the Prospectus.
(iii) The Registration Statement and the Prospectus comply, and on
the Closing Date and any later date on which Option Stock is to be purchased,
the Prospectus will comply, in all material respects, with the provisions of the
Securities Act and the rules and regulations of the Commission thereunder; on
the Effective Date, the Registration Statement did not contain any untrue
statement of a material fact and did not omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; and, on the Effective Date the Prospectus did not and, on the
Closing Date and any later date on which Option Stock is to be purchased, will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties in this subparagraph (iii) shall
apply to statements in, or omissions from, the Registration Statement or the
Prospectus made in reliance upon and in conformity with information herein or
otherwise furnished in writing to the Company by or on behalf of the
Underwriters for use in the Registration Statement or the Prospectus.
(iv) The shares of the Stock to be sold by the Selling Stockholders
have been duly authorized and validly issued and are fully paid and
nonassessable. The shares of the Stock to be sold by the Company, when issued
and sold to the Underwriters as provided herein, will be duly and validly
issued, fully paid and nonassessable. The Stock conforms (or, in the case of the
Stock to be sold by the Company, will conform when issued) to the description
thereof in the Prospectus. No stockholder of the Company has any right that has
not been waived to require the Company to register the sale of any shares owned
by such stockholder under the Securities Act in the public offering contemplated
by this Agreement. No preemptive rights of, or rights of refusal in favor of,
stockholders exist pursuant to the Amended and Restated Certificate of
Incorporation or Amended and Restated By-Laws of the Company with respect to the
Stock, the issue and sale of the Stock to be sold by the Company or the sale of
the Stock to be sold by the Selling Stockholders; and there are no contractual
preemptive rights pursuant to agreements to which the Company is a party that
have not been waived, rights of first refusal or rights of co-sale which exist
pursuant to agreements to which the Company or any of the Selling Stockholders
is a party with respect to the issue and sale of the Stock to be sold by the
Company or the sale of the Stock to be sold by the Selling Stockholders. No
further approval or authority of the stockholders or the Board of Directors of
the Company will be required for the issuance and sale of the Stock to be sold
by the Company or the sale of the Stock to be sold by the Selling Stockholders
as contemplated herein.
(v) The Common Stock is listed on the Nasdaq National Market, and
the Stock has been duly authorized for listing thereon, subject to official
notice of issuance.
(vi) Except as otherwise disclosed in or specifically contemplated
by the Prospectus, to the best of the Company's knowledge, the Company and the
Subsidiaries own, possess adequate rights to use, or can acquire on reasonable
terms, all material patents, patent rights, inventions, trade secrets, know-how,
proprietary techniques, including processes and substances, trademarks, service
marks, trade names and copyrights owned or used by them or which are necessary
for the conduct of their businesses as described in the Prospectus. Except as
disclosed in the Prospectus, neither the Company nor either of the Subsidiaries
has received any written notice of infringement of or conflict with asserted
rights of others with respect to any patents, patent rights, inventions, trade
secrets, know-how, proprietary
3
<PAGE>
techniques, including processes and substances, trademarks, service marks, trade
names or copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
(vii) The Company has not been advised by Deloitte & Touche LLP that
any review of the Company's system of internal accounting controls by Deloitte &
Touche LLP disclosed any weakness in internal controls that Deloitte & Touche
LLP considered to be material weaknesses.
(b) Each of the Selling Stockholders, severally and not jointly,
represents and warrants to the Company and the Underwriters as follows:
(i) On the Closing Date, such Selling Stockholder shall have good and
marketable title to all the shares of the Stock to be sold by such Selling
Stockholder hereunder, free and clear of all liens, encumbrances, equities,
security interests and claims whatsoever, with full right, power and authority
to deliver such shares hereunder, subject, in the case of each Selling
Stockholder other than Gemini (the Non-Gemini Selling Stockholders), to the
rights of the Company, as Custodian (herein called the Custodian), and that upon
the delivery of and payment for such shares of the Stock hereunder, the several
Underwriters will receive good and marketable title thereto, free and clear of
all liens, encumbrances, equities, security interests and claims whatsoever
except any which may be created by the Underwriters.
(ii) If such Selling Stockholder is a Non-Gemini Selling Stockholder:
certificates in negotiable form for the shares of the Stock to be sold by such
Non-Gemini Selling Stockholder (or vested stock options or currently exercisable
warrants to acquire such shares, in each case with notices of exercise or
similar documentation sufficient to cause such options or warrants to be
exercised by the Custodian prior to the Closing Date) have been placed in
custody under a Custody Agreement with the Custodian for delivery under this
Agreement; such Non-Gemini Selling Stockholder specifically agrees that the
shares of the Stock represented by the certificates (or purchasable upon
exercise of options or warrants) so held in custody for such Non-Gemini Selling
Stockholder are subject to the interests of the several Underwriters and the
Company, that the arrangements made by such Non-Gemini Selling Stockholder for
such custody, including the Power of Attorney provided for in connection with
such Custody Agreement, are to that extent irrevocable, and that the obligations
of such Non-Gemini Selling Stockholder shall not be terminated by any act of
such Non-Gemini Selling Stockholder or by operation of law, whether by the death
or incapacity of such Non-Gemini Selling Stockholder (or in the case of a Non-
Gemini Selling Stockholder that is not an individual, the dissolution or
liquidation of such Non-Gemini Selling Stockholder) or the occurrence of any
other event; and if any such death, incapacity, dissolution, liquidation or
other event should occur before the delivery of such shares of the Stock
hereunder, certificates for such shares of the Stock shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such death, incapacity, dissolution, liquidation or other event had not
occurred, regardless of whether the Custodian shall have received notice of such
death, incapacity, dissolution, liquidation or other event.
(iii) Such Selling Stockholder, if not an individual, has obtained all
required approval or authority of its stockholders, Board of Directors or other
governing entity for the issuance and sale of the shares of Stock to be sold by
such Selling Stockholder as contemplated herein. Such Selling Stockholder has
full right, power and authority to enter into this Agreement and any Custody
Agreement and Power of Attorney to which such Selling Stockholder is a party,
and to perform the transactions contemplated hereby and thereby. This Agreement
and any Custody Agreement and Power of Attorney to which such Selling
Stockholder is a party have been duly authorized, executed and delivered by or
on behalf of such Selling Stockholder, and copies of any such Custody Agreement
and Power of Attorney have been delivered to you.
(iv) The making and performance of this Agreement and any Custody
Agreement and Power of Attorney to which such Selling Stockholder is a party,
and the consummation of the transactions contemplated hereby and thereby, will
not (a) conflict with, result in a breach or violation of, or
4
<PAGE>
constitute (either by itself or upon notice or the passage of time or both) a
default under any indenture, mortgage, deed of trust, trust (constructive or
other), loan agreement, lease, franchise, license or other agreement or
instrument to which such Selling Stockholder is a party or by which such Selling
Stockholder or any of its properties is bound or (b) result in (either by itself
or upon notice or the passage of time or both) a violation of any statute or any
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to such Selling
Stockholder or any of such Stockholder's properties. Without limiting the
generality of the foregoing, such Selling Stockholder is not subject to, or has
obtained a waiver of, any contractual or regulatory restrictions that would
prohibit it from owning the shares of Stock to be sold by such Selling
Stockholder hereunder.
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Stock. Such
Selling Stockholder has not distributed and will not make any distribution of
any offering material in connection with the offering and sale of the Stock,
except distributions of the Prospectus or any Preliminary Prospectus authorized
by the Underwriters.
(vi) Such Selling Stockholder has reviewed the information with
respect to such Selling Stockholder contained in the Registration Statement and
Prospectus; and the Prospectus did not include as of the Effective Date, and
will not include as of the Closing Date or on any other date on which Option
Stock is to be purchased, any untrue statement of a material fact with respect
to such Selling Stockholder and did not, and will not, omit to state any
material fact necessary in order to make the statements therein with respect to
such Selling Stockholder, in the light of the circumstances under which they
were made, not misleading.
(c) Each of Ronald Bohlin, Gresham T. Brebach, Jr. and George A. McMillan,
severally and not jointly, represents and warrants that, to the best of his
knowledge, each of the representations and warranties set forth in Section 2(a)
hereof is true and correct. Gemini Consulting, Inc. represents and warrants
that, to the best of its knowledge, the Prospectus did not include as of the
Effective Date, and will not include as of the Closing Date or on any other date
on which Option Stock is to be purchased, any untrue statement of a material
fact and did not, and will not, omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) The representations and warranties of Harry M. Lasker, Harry M. Lasker
Children's Trust, David A. Lubin, David A. Lubin Children's Trust and Melissa E.
Norton set forth in Section 2(a) shall not be construed to limit in any way any
representation or warranty made by them in Section 2(b); and the representations
and warranties of Gemini Consulting, Inc. set forth in Section 2(c) shall not be
construed to limit in any way any representation or warranty made by it in
Section 2(b). Any remedy for a breach of the representations and warranties of
the Selling Stockholders set forth in this Section 2 shall be limited as set
forth in Section 7(f) hereof.
3. Purchase of the Stock by the Underwriters.
(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
50,150 shares of the Underwritten Stock to the several Underwriters, each
Selling Stockholder agrees to sell to the several Underwriters the number of
shares of the Underwritten Stock set forth in Schedule II opposite the name of
such Selling Stockholder, and each of the Underwriters agrees to purchase from
the Company and the Selling Stockholders the
5
<PAGE>
respective aggregate number of shares of the Underwritten Stock set forth
opposite its name in Schedule I. The price at which the shares of the
Underwritten Stock shall be sold by the Company and the Selling Stockholders and
purchased by the several Underwriters shall be $_____ per share. The obligation
of each Underwriter to the Company and each of the Selling Stockholders shall be
to purchase from the Company and the Selling Stockholders that number of shares
of the Underwritten Stock which represents the same proportion of the total
number of shares of the Underwritten Stock to be sold by each of the Company and
the Selling Stockholders pursuant to this Agreement as the number of shares of
the Underwritten Stock set forth opposite the name of such Underwriter in
Schedule I hereto represents of the total number of shares of the Underwritten
Stock to be purchased by all Underwriters pursuant to this Agreement, as
adjusted by you in such manner as you deem advisable to avoid fractional shares.
In making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of
shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for
the number of shares of the Stock agreed to be purchased by such Underwriter or
Underwriters, the non-defaulting Underwriters shall have the right within 24
hours after such default to purchase, or procure one or more other Underwriters
to purchase, in such proportions as may be agreed upon between you and such
purchasing Underwriter or Underwriters and upon the terms herein set forth, all
or any part of the shares of the Stock which such defaulting Underwriter or
Underwriters agreed to purchase. If the non-defaulting Underwriters fail to make
such arrangements with respect to all such shares and portion, the number of
shares of the Stock which each non-defaulting Underwriter is otherwise obligated
to purchase under this Agreement shall be automatically increased on a pro rata
basis to absorb the remaining shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase; provided, however, that the non-
defaulting Underwriters shall not be obligated to purchase the shares and
portion which the defaulting Underwriter or Underwriters agreed to purchase if
the aggregate number of such shares of the Stock exceeds 10% of the total number
of shares of the Stock which all Underwriters agreed to purchase hereunder. If
the total number of shares of the Stock which the defaulting Underwriter or
Underwriters agreed to purchase shall not be purchased or absorbed in accordance
with the two preceding sentences, the Company and the Selling Stockholders shall
have the right, within 24 hours next succeeding the 24-hour period above
referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such shares and portion on the terms herein
set forth. In any such case, either you or the Company and the Selling
Stockholders shall have the right to postpone the Closing Date determined as
provided in Section 5 hereof for not more than seven business days after the
date originally fixed as the Closing Date pursuant to said Section 5 in order
that any necessary changes in the Registration Statement, the Prospectus or any
other documents or arrangements may be made. If neither the non-defaulting
Underwriters nor the Company and the Selling Stockholders shall make
arrangements within the 24-hour periods stated above for the purchase of all the
shares of the Stock which the defaulting Underwriter or Underwriters agreed to
purchase hereunder, this Agreement shall be terminated without further act or
deed and without any liability on the part of the Company or the Selling
Stockholders to any Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company or the Selling Stockholders. Nothing
in this paragraph (b), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants herein
contained, and subject to the terms and conditions herein set forth, the Company
grants an option to the several Underwriters to purchase, severally and not
jointly, up to 165,000 shares in the aggregate of the Option Stock, at the same
price per share as the Underwriters shall pay for the Underwritten Stock. Said
option may be
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exercised only to cover over-allotments in the sale of the Underwritten Stock by
the Underwriters and may be exercised in whole or in part at any time (but not
more than once) on or before the thirtieth day after the date of this Agreement
upon written or telecopied notice by you to the Company setting forth the
aggregate number of shares of the Option Stock as to which the several
Underwriters are exercising the option. Delivery of certificates for the shares
of the Option Stock, and payment therefor, shall be made as provided in Section
5 hereof. The number of shares of the Option Stock to be purchased by each
Underwriter shall be the same proportion of the total number of shares of the
Option Stock to be purchased by the several Underwriters as such Underwriter is
purchasing of the Underwritten Stock, as adjusted by you in such manner as you
deem advisable to avoid fractional shares.
4. Offering by Underwriters.
(a) The terms of the public offering by the Underwriters of the Stock to
be purchased by them shall be as set forth in the Prospectus. The Underwriters
may from time to time change the public offering price after the closing of the
public offering and increase or decrease the concessions and discounts to
dealers as they may determine.
(b) The information set forth in the last paragraph on the front cover
page and under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed by the Company
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriters to the Company for inclusion in the
Registration Statement, any Preliminary Prospectus and the Prospectus, and you
on behalf of the respective Underwriters represent and warrant to the Company
and the Selling Stockholders that the statements made therein are correct.
5. Delivery of and Payment for the Stock.
(a) Delivery of certificates for the shares of the Underwritten Stock and
the Option Stock (if the option granted by Section 3(c) hereof shall have been
exercised not later than 10 A.M., Boston time, on the date two business days
preceding the Closing Date), and payment therefor, shall be made at the office
of Hale and Dorr, 60 State Street, Boston, Massachusetts, at 10 A.M., Boston
time, on the third business day after the date of this Agreement, or at such
time on such other day, not later than seven full business days after such
third business day, as shall be agreed upon in writing by the Company, the
Selling Stockholders and you. The date and hour of such delivery and payment
(which may be postponed as provided in Section 3(b) hereof) are herein called
the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised after
10 A.M., Boston time, on the date two business days preceding the Closing Date,
delivery of certificates for the shares of the Option Stock, and payment
therefor, shall be made at the office of Hale and Dorr, 60 State Street,
Boston, Massachusetts, at 10 A.M., Boston time, on the third business day after
the exercise of such option.
(c) Payment for the shares of Stock purchased from the Company shall be
made to the Company or its order, and payment for the shares of the Stock
purchased from the Selling Stockholders shall be made to the Selling
Stockholders, in each case by one or more certified or official bank check or
checks in next-day funds (and the Company and the Selling Stockholders agree
not to deposit any such check in the bank on which drawn until the day
following the date of its delivery to the Company or the Custodian, as the case
may be). Such payment shall be made upon delivery of certificates for the
Stock to you for the respective accounts of the several Underwriters against
receipt therefor signed by you. Certificates for the Stock to be delivered to
you shall be registered in such name or names and shall be in such denominations
as you may request at least one business day before the Closing Date, in the
case
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of Underwritten Stock, and at least one business day prior to the purchase
thereof, in the case of the Option Stock. Such certificates will be made
available to the Underwriters for inspection, checking and packaging at the
offices of Lewco Securities Corporation, 2 Broadway, New York, New York, not
less than one full business day prior to the Closing Date or, in the case of the
Option Stock, by 3 P.M., New York time, on the business day preceding the date
of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Stockholders for shares to be purchased by any Underwriter whose
check shall not have been received by you on the Closing Date or any later date
on which Option Stock is purchased for the account of such Underwriter. Any such
payment by you shall not relieve such Underwriter from any of its obligations
hereunder.
6. Further Agreements of the Company and the Selling Stockholders. The
Company and, where expressly indicated, the Selling Stockholders respectively
covenant and agree as follows:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A and
(ii) not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify you in the event of (i) the
request by the Commission for amendment of the Registration Statement or for any
supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by the Company of notice
of the initiation or threatening of any proceeding for such purpose. The Company
will make every reasonable effort to prevent the issuance of such a stop order
and, if such an order shall at any time be issued, to obtain the withdrawal
thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to
you a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each post-
effective amendment, if any, to the Registration Statement (together with, in
each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be affecting the Company, or of which the Company shall be
advised in writing by you, shall occur as a result of which it is necessary, in
the opinion of counsel for the Company or of counsel for the Underwriters, to
supplement or amend the Prospectus in
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order to make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser of the Stock, the Company
will forthwith prepare and file with the Commission a supplement to the
Prospectus or an amended prospectus so that the Prospectus as so supplemented or
amended will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances existing at the time such Prospectus is delivered
to such purchaser, not misleading. If, after the public offering of the Stock by
the Underwriters and during such period, the Underwriters shall propose to vary
the terms of offering thereof by reason of changes in general market conditions
or otherwise, you will advise the Company in writing of the proposed variation,
and, if in the opinion either of counsel for the Company or of counsel for the
Underwriters such proposed variation requires that the Prospectus be
supplemented or amended, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus or an amended prospectus setting forth
such variation. The Company authorizes the Underwriters and all dealers to whom
any of the Stock may be sold by the several Underwriters to use the Prospectus,
as from time to time amended or supplemented, in connection with the sale of the
Stock in accordance with the applicable provisions of the Securities Act and the
applicable rules and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will cooperate,
when and as requested by you, in the preparation of such statements, reports
and other documents as are or may be required to continue such qualifications
in effect for so long a period as you may reasonably request for distribution
of the Stock.
(g) During a period of five years commencing with the date hereof,
the Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with Commission.
(h) Not later than the forty-fifth day following the end of the
fiscal quarter first occurring after the first anniversary of the Effective
Date, the Company will make generally available to its security holders an
earnings statement in accordance with Section 11(a) of the Securities Act and
Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc. (herein
called the NASD) of the Registration Statement, any Preliminary Prospectus and
the Prospectus, (ii) the furnishing to the Underwriters of copies of any
Preliminary Prospectus and of the several documents required by paragraph
(c) of this Section 6 to be so furnished, (iii) the printing of this Agreement
and related documents delivered to the Underwriters, (iv) the preparation,
printing and filing of all supplements and amendments to the Prospectus referred
to in paragraph (d) of this Section 6, (v) the furnishing to you and the
Underwriters of the reports and information referred to in paragraph (g) of this
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Section 6, and (vi) the printing and issuance of stock certificates, including
the transfer agent's fees. The Selling Stockholders severally agree to pay any
transfer taxes incident to the transfer to the Underwriters of the shares of the
Stock being sold by the Selling Stockholders.
(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements (including
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel in
qualifying the Stock under state securities or blue sky laws and for filing fees
incident to the review of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) of this Section are
intended to relieve the Underwriters from the payment of the expenses and costs
which the Company hereby agrees to pay and shall not affect any agreement which
the Company and the Selling Stockholders may make, or may have made, for the
sharing of any such expenses and costs.
(l) The Company hereby agrees that, without your prior written
consent, the Company will not, directly or indirectly, sell, offer, contract to
sell, make any short sale, pledge or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any other rights to purchase or acquire Common Stock for a period of 90 days
following the date of the Prospectus, other than (i) the shares of Stock to be
sold to the Underwriters pursuant to this Agreement, (ii) shares of Common Stock
issued under, or upon the exercise of options granted under, any of the
Company's 1995 Director Stock Option Plan, 1995 Equity Incentive Plan and 1995
Employee Stock Purchase Plan (herein collectively called the Plans), all as
described in the Prospectus (including under the heading "Recent
Developments--Proposed Amendment to the Company's 1995 Equity Incentive Plan"),
(iii) options to purchase Common Stock granted under any of the Plans, and
(iv) shares of capital stock issued in connection with the acquisition by the
Company of the assets or capital stock of another person or entity if the terms
of such issuance provide that such shares of capital stock shall not be resold
for a period of 90 days following the date of the Prospectus. For purposes of
this paragraph (l), a sale, offer, or other disposition shall be deemed to
include any sale to an institution which can, following such sale, sell Common
Stock to the public in reliance on Rule 144A.
(m) Each of the Selling Stockholders agrees that, other than the sale
pursuant to this Agreement of the shares of Underwritten Stock to be sold to the
Underwriters hereunder, such Selling Stockholder will not, directly or
indirectly, sell, offer, contract to sell, make any short sale, pledge or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for any other rights to purchase or acquire
Common Stock, without the prior written consent of Hambrecht & Quist LLC, for a
period of 90 days following the date of the Prospectus. Notwithstanding the
foregoing, any Selling Stockholder who is an individual may transfer shares of
Common Stock or securities convertible into or exchangeable or exercisable for
Common Stock either during his or her lifetime or on death (i) by gift, will or
intestacy or (ii) to his or her immediate family or to a trust the beneficiaries
of which are exclusively the undersigned and/or a member or members of his or
her immediate family; provided, however, that prior to any such transfer each
transferee shall execute an agreement, reasonably satisfactory to Hambrecht &
Quist LLC, pursuant to which each transferee shall agree to receive and hold
such shares of Common Stock, or securities exercisable or convertible into or
exchangeable for Common Stock, subject to the provisions of this paragraph (m),
and there shall be no further transfer except in accordance with the provisions
of this paragraph (m). For the purposes of this paragraph, "immediate family"
shall mean spouse, lineal descendant, father, mother, brother or sister of the
transferor.
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(n) The Company is familiar with the Investment Company Act of 1940,
as amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
7. Indemnification and Contribution.
(a) The Company and the Selling Stockholders jointly and severally agree
to indemnify and hold harmless each Underwriter and each person (including each
partner or officer thereof) who controls any Underwriter within the meaning of
Section 15 of the Securities Act from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Securities Act, the Securities Exchange
Act of 1934, as amended (herein called the Exchange Act), or the common law or
otherwise, and the Company and the Selling Stockholders jointly and severally
agree to reimburse each such Underwriter and controlling person for any legal or
other expenses (including, except as otherwise hereinafter provided, reasonable
fees and disbursements of counsel) incurred by the respective indemnified
parties in connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) Registration
Statement) or any post-effective amendment thereto (including any Rule 462(b)
Registration Statement), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
and the Selling Stockholders contained in this paragraph (a) shall not apply to
any such losses, claims, damages, liabilities or expenses if such statement or
omission was made in reliance upon and in conformity with information furnished
as herein stated or otherwise furnished in writing to the Company by or on
behalf of any Underwriter for use in any Preliminary Prospectus or the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto and (2) the indemnity agreement contained in this paragraph
(a) with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Stock which is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
(excluding the documents incorporated therein by reference) and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented) unless the failure is the result of noncompliance by the Company
with paragraph (c) of Section 6 hereof. The indemnity agreements of the Company
and the Selling Stockholders contained in this paragraph (a) and the
representations and warranties of the Company and the Selling Stockholders
contained in Section 2 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Stock.
Notwithstanding any other provision of this Section 7(a), (I) any payment
obligation of the Selling Stockholders under this Section 7(a) shall be limited
to the amount of losses, claims, damages and liabilities (including interim
reimbursement payments with respect thereto) that are not paid by the Company
pursuant to this Section 7(a), and such payment shall not be required from the
Selling
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Stockholders until after demand for payment has been made by the Underwriters
first upon the Company and such payment is not made by the Company within thirty
days of such demand and (II) any payment obligation of the Selling Stockholders
other than the Principals under this Section 7(a) shall be further limited to
the amount of losses, claims, damages and liabilities (including interim
reimbursement payments with respect thereto) that are not paid by the Principals
pursuant to this Section 7(a), and such payment shall not be required from the
Selling Stockholders other than the Principals until after demand for payment
has been made by the Underwriters first upon the Principals (which demand shall
not be made until thirty days after demand upon the Company as contemplated by
the preceding clause (I)) and such payment is not made by the Principals within
thirty days of such demand, provided, however, that the limitations in the
preceding clauses (I) and (II) shall not apply with respect to any Selling
Stockholder in the event and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the information with respect to
such Selling Stockholder set forth under the caption "Principal and Selling
Stockholders" in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its officers who signs the Registration Satement on his own
behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, and the Selling Stockholders from and against any and
all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) Registration Statement) or any post-effective amendment thereto
(including any Rule 462(b) Registration Statement) or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto) or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished as herein stated or otherwise
furnished in writing to the Company by or on behalf of such indemnifying
Underwriter for use in the Registration Statement or the Prospectus or any such
amendment thereof or supplement thereto. The indemnity agreement of each
Underwriter contained in this paragraph (b) shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a) and (b)
of this Section 7 agrees that, upon the service of a summons or other initial
legal process upon it in any action or suit instituted against it or upon its
receipt of written notification of the commencement of any investigation or
inquiry of, or proceeding against, it in respect of which indemnity may be
sought on account of any indemnity agreement contained in such paragraphs, it
will promptly give written notice (herein called the Notice) of such service or
notification to the party or parties from whom indemnification may be sought
hereunder. No indemnification provided for in such paragraphs shall be available
to any party who shall
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fail so to give the Notice if the party to whom such Notice was not given was
unaware of the action, suit, investigation, inquiry or proceeding to which the
Notice would have related and was prejudiced by the failure to give the Notice,
but the omission so to notify such indemnifying party or parties of any such
service or notification shall not relieve such indemnifying party or parties
from any liability which it or they may have to the indemnified party for
contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (herein called the Notice of Defense) to the indemnified party, to assume
(alone or in conjunction with any other indemnifying party or parties) the
entire defense of such action, suit, investigation, inquiry or proceeding, in
which event such defense shall be conducted, at the expense of the indemnifying
party or parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; provided, however,
that (i) no indemnifying party shall, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm (in addition to any local counsel)
for all indemnified parties unless the indemnified party or parties reasonably
determine that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses available to such indemnified party or parties different
from or in addition to those available to the indemnifying party or parties, in
which case counsel for the indemnified party or parties shall be entitled to
conduct the defense to the extent reasonably determined by such counsel to be
necessary to protect the interests of the indemnified party or parties and
(ii) in any event, the indemnified party or parties shall be entitled to have
counsel chosen by such indemnified party or parties participate in, but not
conduct, the defense. If, within a reasonable time after receipt of the Notice,
an indemnifying party gives a Notice of Defense and the counsel chosen by the
indemnifying party or parties is reasonably satisfactory to the indemnified
party or parties, the indemnifying party or parties will not be liable under
paragraphs (a) through (c) of this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding, except that
(A) the indemnifying party or parties shall bear the legal and other expenses
incurred in connection with the conduct of the defense as referred to in clause
(i) of the proviso to the preceding sentence and (B) the indemnifying party or
parties shall bear such other expenses as it or they have authorized to be
incurred by the indemnified party or parties. If, within a reasonable time after
receipt of the Notice, no Notice of Defense has been given, the indemnifying
party or parties shall be responsible for any legal or other expenses incurred
by the indemnified party or parties in connection with the defense of the
action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under paragraph (a) or (b) of
this Section 7, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities referred to in
paragraph (a) or (b) of this Section 7 (i) in such proportion as is appropriate
to reflect the relative benefits received by each indemnifying party from the
offering of the Stock or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of each indemnifying party in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, or
actions in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same respective proportions as the total net proceeds from the
offering of the Stock received by the Company and the Selling Stockholders and
the total underwriting discount received by the Underwriters, as set forth in
the table on the cover page of the Prospectus, bear to the
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aggregate public offering price of the Stock. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by each indemnifying
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Stock purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in paragraph (c) of this Section 7).
(e) Neither the Company nor the Selling Stockholders will, without the
prior written consent of each Underwriter, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
is a party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of such Underwriter and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding. The Underwriters will not, without the prior
written consent of the Company and each Selling Stockholder, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not the Company, any person who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act or a Selling Stockholder is a party to such claim, action,
suit or proceeding) unless such settlement, compromise or consent includes an
unconditional release of the Company, each such controlling person and each
Selling Stockholder from all liability arising out of such claim, action, suit
or proceeding.
(f) Notwithstanding anything to the contrary contained herein, the
aggregate liability of each Selling Stockholder under the indemnity,
contribution and reimbursement agreements contained in the provisions of this
Section 7 and Section 11 hereof and for any breach of the representations and
warranties of such Selling Stockholder set forth in Section 2 hereof shall be
limited to an amount equal to the net proceeds received by such Selling
Stockholder from the sale of the Stock sold by such Selling Stockholder to the
Underwriters, provided that the foregoing limitation shall not apply to any
liability of
14
<PAGE>
a Selling Stockholder under such indemnity, contribution and reimbursement
agreements or such representations and warranties to the extent such liability
arises from an inaccuracy in the representations and warranties of such Selling
Stockholder set forth in Section 2(b)(i). The Company and the Selling
Stockholders may agree, as among themselves and without limiting the rights of
the Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible.
8. Termination. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Stockholders if after the date of this Agreement trading in the Common
Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States on
or after the date hereof, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States would, in the
Underwriters' reasonable judgment, make the offering or delivery of the Stock
impracticable, (iii) a suspension of trading in securities generally or a
material adverse decline in value of securities generally on the New York Stock
Exchange, the American Stock Exchange, the NASD Automated Quotation System or
the Nasdaq National Market, or limitations on prices (other than limitations on
hours or numbers of days of trading) for securities on either such exchange or
system, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of, or commencement of any
proceeding or investigation by, any court, legislative body, agency or other
governmental authority which in the Underwriters' reasonable opinion materially
and adversely affects or will materially or adversely affect the business or
operations of the Company, (v) declaration of a banking moratorium by either
federal or New York State authorities or (vi) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in the Underwriters' reasonable opinion has a material
adverse effect on the securities markets in the United States. If this Agreement
shall be terminated pursuant to this Section 8, there shall be no liability of
the Company or the Selling Stockholders to the Underwriters and no liability of
the Underwriters to the Company or the Selling Stockholders; provided, however,
that in the event of any such termination the Company and the Selling
Stockholders (other than Gemini Consulting, Inc.) agree to reimburse the
Underwriters on demand for all out-of-pocket costs and expenses incident to the
performance of the obligations of the Company and the Selling Stockholders under
this Agreement, including all out-of-pocket costs and expenses contemplated by
paragraphs (i) and (j) of Section 6 hereof.
9. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Stockholders of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Option Stock is to be purchased, as the case may be,
and to the following further conditions:
(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder
and the validity and form of the certificates representing the Stock, all
corporate proceedings and other legal matters incident to the foregoing, and the
form of the Registration Statement and of the Prospectus (except as to the
financial statements and schedules and other financial data contained therein),
shall have been approved at or prior to the Closing Date by Foley, Hoag & Eliot
LLP, counsel for the Underwriters.
15
<PAGE>
(c) You shall have received from Hale and Dorr, counsel for the
Company and the Selling Stockholders other than Gemini Consulting, Inc., an
opinion, addressed to the Underwriters and dated the Closing Date, covering the
matters set forth in Annex A hereto, and if Option Stock is purchased at any
date after the Closing Date, additional opinions from such counsel, addressed to
the Underwriters and dated such later date, confirming that the statements
expressed as of the Closing Date in such opinion (other than the statements
expressed with respect to any of the Selling Stockholders) remain valid as of
such later date. In addition, you shall have received from counsel for Gemini
Consulting, Inc., who shall be acceptable to the Underwriters, an opinion,
addressed to the Underwriters and dated the Closing Date, covering the matters
set forth in Annex B hereto.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, respectively, not misleading, (ii) since the Effective
Date, no event has occurred which should have been set forth in a supplement or
amendment to the Prospectus which has not been set forth in such a supplement
or amendment, (iii) since the respective dates as of which information is given
in the Registration Statement in the form in which it originally became
effective and the Prospectus contained therein, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the business, properties, financial condition or results
of operations of the Company and the Subsidiaries, taken as a whole, whether or
not arising from transactions in the ordinary course of business, and, since
such dates, except in the ordinary course of business, neither the Company nor
either of the Subsidiaries has entered into any transaction material to the
Company and the Subsidiaries, taken as a whole, not referred to in the
Registration Statement in the form in which it originally became effective and
the Prospectus contained therein, (iv) neither the Company nor either of the
Subsidiaries has any contingent obligations which are material to the Company
and the Subsidiaries, taken as a whole, and are not disclosed in the
Registration Statement and the Prospectus, (v) there are not any pending or
known threatened legal proceedings to which the Company or either of the
Subsidiaries is a party or of which property of the Company or either of the
Subsidiaries is the subject which are material to the Company and the
Subsidiaries, taken as a whole, and which are not disclosed in the Registration
Statement and the Prospectus, (vi) there are not any franchises, contracts,
leases or other documents which are required to be filed as exhibits to the
Registration Statement which have not been filed as required, and (vii) the
representations and warranties of the Company herein are true and correct in
all material respects as of the Closing Date or any later date on which Option
Stock is to be purchased, as the case may be.
(e) You shall have received on the Closing Date and on any later date
on which Option Stock is purchased a certificate, dated the Closing Date or such
later date, as the case may be, and signed by the chief executive officer and
the chief financial officer of the Company, stating that the respective signers
of said certificate have carefully examined the Registration Statement in the
form in which it originally became effective and the Prospectus contained
therein and any supplements or amendments thereto, and that the statements
included in clauses (i) through (vii) of paragraph (d) of this Section 9 are
true and correct.
(f) You shall have received from Deloitte & Touche LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Option Stock is purchased, confirming that they are independent
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable published rules and regulations thereunder and
based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (herein called the Original
Letter), but carried out to a date not more than five business days prior to the
Closing Date or such later date on which Option Stock is purchased, (i)
confirming, to the extent true,
16
<PAGE>
that the statements and conclusions set forth in the Original Letter are
accurate as of the Closing Date or such later date, as the case may be, and
(ii) setting forth any revisions and additions to the statements and conclusions
set forth in the Original Letter which are necessary to reflect any changes in
the facts described in the Original Letter since the date of the Original Letter
or to reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company or the Subsidiaries which, in your reasonable judgment, makes it
impractical or inadvisable to proceed with the public offering of the Stock or
the purchase of the Option Stock as contemplated by the Prospectus.
(g) You shall have been furnished evidence in usual written or
telecopied form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.
(h) On or prior to the Closing Date, you shall have received from
each director and executive officer named in the Prospectus, other than the
Selling Stockholders, letter agreements substantially to the effect of the
agreements of the Selling Stockholders set forth in Section 6(m) hereof.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Foley, Hoag & Eliot LLP, counsel for the
Underwriters, shall be satisfied that they comply in form and scope (except for
the content of financial statements and schedules) to the provisions of this
Agreement.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and the Selling Stockholders. Any such termination shall be without
liability of the Company or the Selling Stockholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Stockholders; provided, however, that (i) in the event of such termination, the
Company agrees to indemnify and hold harmless the Underwriters from all costs
or expenses incident to the performance of the obligations of the Company and
the Selling Stockholders under this Agreement, including all costs and expenses
referred to in paragraphs (i) and (j) of Section 6 hereof, and (ii) if this
Agreement is terminated by you because of any refusal, inability or failure on
the part of the Company or the Selling Stockholders to perform any agreement
herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with transactions
contemplated hereby.
10. Conditions of the Obligation of the Company and the Selling
Stockholders. The obligation of the Company and the Selling Stockholders to
deliver the Stock shall be subject to the conditions that (a) the Registration
Statement shall have become effective and (b) no stop order suspending the
effectiveness thereof shall be in effect and no proceedings therefor shall be
pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company and the Selling
Stockholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Stockholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Stockholders; provided, however, that in the event of any such termination the
Company agrees to indemnify and hold harmless the Underwriters from all costs
or expenses incident to the performance of the obligations of the Company
17
<PAGE>
and the Selling Stockholders under this Agreement, including all costs and
expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
11. Reimbursement of Certain Expenses. In addition to their other
obligations under Section 7 of this Agreement and subject, in the case of the
Selling Stockholders, to the provisions of paragraph (f) of Section 7, the
Company and the Selling Stockholders hereby jointly and severally agree to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company and the
Selling Stockholders, upon request, reasonable assurances of their ability to
effect any refund, when and if due.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of the Company, the Selling Stockholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Stockholders and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.
13. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telecopy and, if to the Underwriters, shall
be mailed, telecopied or delivered to Hambrecht & Quist LLC, One Bush Street,
San Francisco, California 94104, with a copy to Foley, Hoag & Eliot LLP, One
Post Office Square, Boston, Massachusetts 02109, Attention: Mark L. Johnson,
Esq.; if to the Company, shall be mailed, telecopied or delivered to it at its
office, Lincoln North, 55 Old Bedford Road, Lincoln, Massachusetts 01773,
Attention: David P. Norton, President and Chief Executive Officer, with a copy
to Hale and Dorr, 60 State Street, Boston, Massachusetts 02109, Attention: Hal
J. Leibowitz, Esq.; if to a Selling Stockholder, to the address for such
Selling Stockholder set forth on Schedule II hereto. All notices given by
telecopy shall be promptly confirmed by letter.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of paragraphs
(l), (m) and (n) of Section 6 hereof shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of The Commonwealth of Massachusetts.
18
<PAGE>
Please sign and return to the Company and to the Selling Stockholders in
care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters in accordance with its terms.
Very truly yours,
RENAISSANCE SOLUTIONS, INC.
By
----------------------------------
Title:
GEMINI CONSULTING, INC.
By
----------------------------------
Title:
SELLING STOCKHOLDERS
LISTED ON SCHEDULE II HERETO
(OTHER THAN GEMINI CONSULTING, INC.)
By
----------------------------------
Attorney-in-Fact
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
COWEN & COMPANY
ROBERTSON, STEPHENS & COMPANY LLC
By Hambrecht & Quist LLC
By
-----------------------------------
Name:
Managing Director
19
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Schedule I
UNDERWRITERS
Number of Shares of
Underwritten Stock
Underwriters to be Purchased
- ------------ ---------------
Hambrecht & Quist LLC .................................
Cowen & Company .......................................
Robertson, Stephens & Company LLC .....................
-------
Total ..............................................
=======
20
<PAGE>
Schedule II
SELLING STOCKHOLDERS
Number of Shares of
Underwritten Stock
Names of Selling Stockholders* to be Sold
- ------------------------------ ----------
Ronald Bohlin ......................................... 16,250
Gresham T. Brebach, Jr. ............................... 15,000
Gemini Consulting, Inc. ............................... 783,600
Harry M. Lasker ....................................... 66,005
Harry M. Lasker Children's Trust ...................... 8,995
David A. Lubin ........................................ 65,000
David A. Lubin Children's Trust ....................... 10,000
George A. McMillan .................................... 10,000
Melissa E. Norton ..................................... 75,000
---------
Total ........................................... 1,049,850
=========
- -------------
* The address of Gemini Consulting, Inc. is 25 Airport Road, Morristown, New
Jersey 07960 and the address of the other Selling Stockholders is c/o
Renaissance Solutions, Inc., Lincoln North, 55 Old Bedford Road, Lincoln,
Massachusetts 01773.
21
<PAGE>
ANNEX A
Matters to be Covered in the Opinion of Hale and Dorr,
Counsel for the Company and Certain Selling Stockholders
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, is duly
qualified to transact business in each of the jurisdictions listed on Schedule A
thereto, and has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement.
(ii) The Company has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus (except for
subsequent issuances, if any, pursuant to the exercise of stock options
described in the Prospectus); the outstanding shares of Common Stock, including
the Stock to be sold by the Selling Stockholders, have been duly authorized and
validly issued and are fully paid and non-assessable; the certificates
evidencing the Stock delivered to the Underwriters are in due and proper form
under Delaware law, and when duly countersigned by the Company's transfer agent
and registrar and delivered to the Underwriters or upon the Underwriters' order
against payment of the agreed consideration therefor in accordance with the
provisions of this Agreement, the Stock represented thereby will be duly
authorized and validly issued, fully paid and non-assessable; no preemptive
rights of, or rights of refusal in favor of, stockholders exist with respect to
the Stock to be sold by the Company, or the issue and sale thereof, pursuant to
the Amended and Restated Certificate of Incorporation or Amended and Restated
By-Laws of the Company; and, to such counsel's knowledge, there are no
contractual preemptive rights, rights of first refusal or rights of co-sale
which exist and that have not been waived with respect to the issue and sale of
the Stock to be sold by the Company or the sale of the Stock to be sold by the
Selling Stockholders.
(iii) The Registration Statement has become effective under the Securities
Act and, to such counsel's knowledge, (A) no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus is in effect and (B) no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(iv) The Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion), when filed and when declared
effective, complied as to form in all material respects with the requirements of
the Securities Act and the applicable rules and regulations of the Commission
thereunder; and the documents incorporated by reference in the Registration
Statement and the Prospectus (except as to the financial statements and
schedules and other financial data incorporated by reference therein, as to
which such counsel need express no opinion), on the date on which they were
filed with the Commission, complied as to form in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations of the
Commission thereunder.
(v) The statements under the caption "Description of Capital Stock" in
the Prospectus, insofar as such statements constitute matters of law or legal
conclusions, have been reviewed by such counsel and are correct in all material
respects; and, to such counsel's knowledge, the description of the Plans and the
securities granted and which may be granted thereunder as set forth in the
Prospectus accurately and fairly present the information required to be shown
with respect to the Plans to the extent required by the Securities Act and the
applicable rules and regulations of the Commission thereunder.
22
<PAGE>
(vi) Such counsel do not know of any franchises, contracts, leases or
documents which in such counsel's opinion are of a character required by the
Securities Act or the rules and regulations thereunder to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not described and filed as required.
(vii) Such counsel do not know of any material legal proceedings pending
or threatened against the Company or either of the Subsidiaries required to be
described in the Prospectus which are not described as required.
(viii) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The issue and sale by the Company of the shares of the Stock to be
sold by the Company as contemplated by the Underwriting Agreement will not
conflict with, or result in a breach of, the Amended and Restated Certificate
of Incorporation or Amended and Restated By-Laws of the Company or any
agreement or instrument listed as an Exhibit to the Registration Statement.
(x) Upon registration of the Stock to be sold by the Non-Gemini Selling
Stockholders hereunder in the names of the Underwriters in the stock records of
the Company, and assuming the Underwriters purchased such Stock in good faith
and without notice of any adverse claim within the meaning of Section 8-302 of
the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts,
the Underwriters will have acquired all rights of the Non-Gemini Selling
Stockholders in such Stock free of any adverse claim, any lien in favor of the
Company, and any restrictions on transfer imposed by the Company.
(xi) The Underwriting Agreement has been duly executed and delivered by
or on behalf of each of the Non-Gemini Stockholders, and the Custody Agreement
between each Non-Gemini Stockholder and the Custodian and the Power of Attorney
referred to in such Custody Agreement have been duly executed and delivered by
each of the Non-Gemini Stockholders.
(xii) Based insofar as factual matters are concerned solely upon
certificates of the Company and the Non-Gemini Stockholders, no consent,
approval, authorization or order of any court or governmental agency or body is
required for the consummation by the Company and the Non-Gemini Stockholders of
the transactions contemplated by the Underwriting Agreement, except such as have
been obtained or made and are in full force and effect and such as may be
required by the NASD, or by State securities and Blue Sky laws, as to which such
counsel need express no opinion.
(xiii) To such counsel's knowledge, all holders of securities of the
Company having rights to the registration of shares of Common Stock, or other
securities, because of the filing of the Registration Statement by the Company
have waived such rights or such rights have expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement.
In rendering the foregoing opinion, such counsel may, as to questions of
law not involving the laws of the United States, the Commonwealth of
Massachusetts or the Delaware General Corporation Law statute, assume, without
independent inquiry, that such laws are the same as those of the Commonwealth
of Massachusetts.
23
<PAGE>
In addition to the matters set forth above, counsel rendering the foregoing
opinion shall also include a statement to the effect that no facts have come to
the attention of such counsel that have caused them to believe that the
Registration Statement, as of the Effective Date (but after giving effect to
changes incorporated pursuant to Rule 430A under the Securities Act), contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading (except that such counsel need express no view with
respect to the financial statements, including the notes and schedules thereto,
or any other financial, accounting or statistical data included therein), that
the Prospectus, as of the date it was filed with the Commission pursuant to
Rule 424(b) under the Securities Act, contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading (except that such counsel need express no view with
respect to the financial statements, including the notes and schedules thereto,
or any other financial, accounting or statistical data included therein), or
that the Registration Statement and the Prospectus, as of the Closing Date (or
any later date on which Option Stock is purchased), contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading (except that such counsel need express no
view with respect to the financial statements, including the notes and
schedules thereto, or any other financial, accounting or statistical data
included therein). With respect to such statement, such counsel may state that
their belief is based upon the procedures set forth therein, but is without
independent check or verification.
24
<PAGE>
ANNEX B
Matters to be Covered in the Opinion of
Counsel for Gemini Consulting, Inc.
(i) Gemini Consulting, Inc. (hereinafter Gemini) is validly existing as
a corporation in good standing under the laws of the State of New Jersey.
(ii) Gemini has corporate power to enter into the Underwriting Agreement,
and to perform its obligations thereunder, including its obligations to sell,
transfer and deliver in the manner provided in the Underwriting Agreement the
shares of Stock being sold by it under the Underwriting Agreement.
(iii) The execution and delivery of the Underwriting Agreement have been
duly authorized by all necessary corporate action of Gemini, and the
Underwriting Agreement has been duly executed and delivered by or on behalf of
Gemini.
(iv) Based insofar as factual matters are concerned solely upon
certificates of Gemini, no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation by Gemini
of the transactions contemplated by the Underwriting Agreement, except such as
have been obtained or made and are in full force and effect and such as may be
required by the NASD or by state securities and Blue Sky laws, as to which such
counsel need express no opinion.
(v) Upon registration of the Stock to be sold by Gemini under the
Underwriting Agreement in the names of the Underwriters in the stock records of
the Company, and assuming the Underwriters purchased such Stock in good faith
and without notice of any adverse claim within the meaning of Section 8-302 of
the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts,
the Underwriters will have acquired all rights of Gemini in such Stock free of
any adverse claim, any lien in favor of the Company, and any restrictions on
transfer imposed by the Company.
25
<PAGE>
HALE AND DORR
COUNSELLORS AT LAW
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
(617) 526-6000 . FAX (617) 526-5000
October 28, 1996
Renaissance Solutions, Inc.
Lincoln North
55 Old Bedford Road
Lincoln, MA 01773
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-3 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the public offering of an aggregate
of 1,265,000 shares of Common Stock, $.0001 par value per share (the "Common
Stock"), of Renaissance Solutions, Inc., a Delaware corporation (the "Company"),
of which (i) 215,150 shares of Common Stock (including 165,000 shares of Common
Stock subject to an over-allotment option granted by the Company to the
Underwriters (as defined below)) will be issued and sold by the Company to the
Underwriters, and (ii) 1,049,850 shares of Common Stock will be sold by certain
stockholders of the Company (the "Selling Stockholders") to the Underwriters
(such shares being hereinafter referred to as the "Shares"). The Shares include
664,850 shares (the "Warrant and Option Shares") which are issuable by the
Company upon the exercise of outstanding warrants and options (the "Warrants and
Options").
The Shares are to be sold by the Company and the Selling Stockholders
pursuant to an underwriting agreement (the "Underwriting Agreement") to be
entered into among the Company, the Selling Stockholders, and Hambrecht & Quist
LLC, Cowen & Company and Robertson Stephens & Company, LLC (the "Underwriters"),
the form of which has been filed as Exhibit 1 to the Registration Statement.
We have acted as counsel for the Company in connection with the sale by the
Company and the Selling Stockholders of the Shares. We have examined signed
copies of the Registration Statement and all exhibits thereto, all as filed with
the Commission. We have also examined and relied upon the original or copies of
minutes of meetings of the stockholders and Board of Directors of the Company,
stock record books of the Company, a copy of the By-Laws of the Company, as
WASHINGTON, DC BOSTON, MA MANCHESTER, NH
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HALE AND DORR IS A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
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Renaissance Solutions, Inc.
October 28, 1996
Page 2
amended, and a copy of the Amended and Restated Certificate of Incorporation of
the Company.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
We assume that the appropriate action will be taken, prior to the offer and
sale of the Shares in accordance with the Underwriting Agreement, to register
and qualify the Shares for sale under all applicable state securities or "Blue
Sky" laws.
We express no opinion herein as to the laws of any state or jurisdiction
other than the state laws of the Commonwealth of Massachusetts, the Delaware
General Corporation Law statute and the federal laws of the United States of
America.
Based upon the foregoing, we are of the opinion that (i) the Shares to be
issued and sold by the Company have been duly authorized for issuance and, when
issued and paid for in accordance with the terms of the Underwriting Agreement,
will be validly issued, fully paid and nonassessable, and (ii) the Shares to be
sold by the Selling Stockholders have been duly authorized and are, or, in the
case of the Warrant and Option Shares, when issued and sold in accordance with
the terms of the Warrants and Options, will be, validly issued, fully paid and
nonassessable.
It is understood that this opinion is to be used only in connection with
the offer and sale of the Shares while the Registration Statement is in effect.
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters."
In giving
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Renaissance Solutions, Inc.
October 28, 1996
Page 3
such consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission.
Very truly yours,
/s/ Hale and Dorr
HALE AND DORR
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Renaissance
Solutions, Inc. on Form S-3 of our report dated October 24, 1996 appearing in
the Prospectus, which is part of this Registration Statement, and to the
reference to us under the headings "Selected Consolidated Financial Data" and
"Experts" in such Prospectus.
Deloitte & Touche LLP
Boston, Massachusetts
October 25, 1996
