-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LtJuEkRcqte90ND416eiU08hax8nEzmhulYHMJKjp8Xpc756ywPUrZk0+WgFj5c4 im8ZRoanDBXdn1HYyIdzZA== 0000940180-98-000293.txt : 19990827 0000940180-98-000293.hdr.sgml : 19990827 ACCESSION NUMBER: 0000940180-98-000293 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19980317 DATE AS OF CHANGE: 19990826 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANSWERTHINK CONSULTING GROUP INC CENTRAL INDEX KEY: 0001057379 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 650750100 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-48123 FILM NUMBER: 98567633 BUSINESS ADDRESS: STREET 1: 1401 BRICKELL AVENUE STE 440 CITY: MIAMI STATE: FL ZIP: 33131 BUSINESS PHONE: 3053758005 S-1 1 FORM S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1998 REGISTRATION NO. 333- - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ANSWERTHINK CONSULTING GROUP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 8748 [APPLIED FOR] (STATE OF INCORPORATION) (PRIMARY S.I.C. CODE NUMBER) IRS EMPLOYER IDENTIFICATION NO.) 1001 BRICKELL BAY DRIVE, SUITE 3000 MIAMI, FLORIDA 33131 (305) 375-8005 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) TED A. FERNANDEZ PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN ANSWERTHINK CONSULTING GROUP, INC. 1001 BRICKELL BAY DRIVE, SUITE 3000 MIAMI, FLORIDA 33131 (305) 375-8005 (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE OF AGENT FOR SERVICE) COPIES TO: DAVID B.H. MARTIN, JR., ESQ. KEITH F. HIGGINS, ESQ. HOGAN & HARTSON L.L.P. ROPES & GRAY 555 13TH STREET, N.W. ONE INTERNATIONAL PLACE WASHINGTON, DC 20004-1190 BOSTON, MA 02110-2624 (202) 637- 5600 (617) 951-7000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] CALCULATION OF REGISTRATION FEE =============================================================================== PROPOSED TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE - - ------------------------------------------------------------------------------- Common Stock, par value $.01 per share..... $70,000,000 $20,650 =============================================================================== (1) Estimated pursuant to Rule 457(o), solely for the purposes of computing the registration fee. 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. - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +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 ANY + +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. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS (Subject To Completion) Issued April , 1998 Shares [AnswerThink Consulting Group, Inc. Logo] COMMON STOCK ----------- OF THE SHARES OF COMMON STOCK BEING OFFERED, SHARES ARE BEING SOLD BY THE COMPANY AND SHARES ARE BEING SOLD BY THE SELLING STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." PRIOR TO THE OFFERING THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE BETWEEN $ AND $ . SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE. ----------- THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 3 HEREOF. ----------- 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. ----------- PRICE $ A SHARE ----------- UNDERWRITING PROCEEDS TO PRICE TO DISCOUNTS AND PROCEEDS TO SELLING PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS -------- -------------- ----------- ------------ Per Share...................... $ $ $ $ Total(3)....................... $ $ $ $ - - ----- (1) The Company and the Selling Stockholders have agreed to indemnify the several Underwriters, as defined, against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriters." (2) Before deducting expenses payable by the Company estimated to be $ . (3) The Company and certain Selling Stockholders have granted to the Underwriters an option exercisable within 30 days of the date hereof to purchase up to an aggregate of additional Shares of Common Stock at the price to public less underwriting discounts and commissions for the purpose of covering over-allotments, if any. If the Underwriters exercise such option in full, the total price to public, underwriting discounts and commissions, proceeds to Company and proceeds to Selling Stockholders will be $ , $ , $ and $ , respectively. See "Underwriters." ----------- The Shares are offered, subject to prior sale, when, as and if accepted by the Underwriters named herein and subject to approval of certain legal matters by Ropes & Gray, counsel for the Underwriters. It is expected that delivery of the Shares will be made on or about , 1998 at the office of Morgan Stanley & Co. Incorporated, New York, New York, against payment therefor in immediately available funds. ----------- MORGAN STANLEY DEAN WITTER DONALDSON, LUFKIN & JENRETTE Securities Corporation NATIONSBANC MONTGOMERY SECURITIES LLC THE ROBINSON-HUMPHREY COMPANY , 1998 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING (THE "OFFERING") 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, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ---------------- UNTIL (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ---------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary....................................................... 1 Risk Factors............................................................. 3 The Company.............................................................. 10 Use of Proceeds.......................................................... 10 Dividend Policy.......................................................... 10 Capitalization........................................................... 11 Dilution................................................................. 12 Selected Consolidated Financial and Pro Forma Data....................... 13 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 15 Business................................................................. 19 Management............................................................... 30 Certain Transactions..................................................... 36 Principal and Selling Stockholders....................................... 39 Description of Capital Stock............................................. 40 Shares Eligible for Future Sale.......................................... 43 Underwriters............................................................. 45 Legal Matters............................................................ 47 Experts.................................................................. 47 Additional Information................................................... 47 Index to Financial Statements............................................ F-1
---------------- The Company intends to furnish its stockholders with annual reports containing audited consolidated financial statements and an opinion thereon expressed by an independent public accounting firm and with quarterly reports for the first three quarters of each year containing unaudited consolidated interim financial information. ---------------- Except as set forth in the consolidated financial statements or as otherwise indicated herein, all information in this Prospectus assumes (i) that the reincorporation of the Company, a Florida corporation, in Delaware pursuant to a merger (the "Reincorporation") prior to the effective date of the Offering has not yet occurred, and (ii) no exercise of the Underwriters' over-allotment option. As used in this Prospectus, unless the context otherwise requires, references to "AnswerThink" or the "Company" with respect to any date prior to the Reincorporation are to the Florida corporation and its subsidiaries; with respect to any date after the Reincorporation, such references are to the Delaware corporation and its subsidiaries. ---------------- CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS." PROSPECTUS SUMMARY This summary is qualified by the more detailed information and the audited financial statements and the unaudited pro forma financial information and notes thereto appearing elsewhere in this Prospectus. THE COMPANY AnswerThink Consulting Group, Inc. ("AnswerThink" or the "Company") is a rapidly growing provider of knowledge-based consulting and information technology ("IT") services to Fortune 1000 companies and other sophisticated buyers. The Company addresses its clients' strategic business needs by offering a wide range of integrated services or solutions, including benchmarking, process transformation, software package implementation, electronic commerce, decision support technology, technology architecture and integration and Year 2000 solutions. These solutions target a client's specific business functions (finance and administration, human resources, IT, sales and customer support, and supply chain management) and allow a business to reach beyond the enterprise and link the people, processes and technologies of the extended organization or "Interprise." AnswerThink markets its services to senior executives in organizations where business transformation and technology- enabled change can have a significant competitive impact. AnswerThink leverages its knowledge base to propose solutions to its clients' most critical and complex business problems. The Company delivers its services through multidisciplinary project teams that include professionals with both IT and business expertise. The Company's knowledge-based approach to consulting combines the knowledge and experience of its consultants with "best practice" process solutions and a benchmarking database developed by its subsidiary, The Hackett Group, Inc. (the "Hackett Group"). The Company believes its highly focused service delivery model provides its customers with a lower risk of delivery and a faster time to benefit as compared to the linear, "methodology based" processes employed by many other IT consulting firms. The Company was formed in April 1997 by several former leaders of the IT consulting practice of a "Big Six" accounting firm. From the outset, the Company made operational investments to develop a comprehensive market strategy, build a business infrastructure and create sophisticated management information and service delivery systems capable of supporting a large-scale consulting and IT services business. Since its formation, AnswerThink has acquired several consulting and IT services businesses, each of which brought to the Company complementary skills and customer relationships. In addition, the Company has grown internally by recruiting more than 150 consultants. As of March 1, 1998, the Company employed 308 consultants. The Company supports its national solution delivery organization through a network of 10 offices located in Atlanta, Boston, Chicago, Cleveland, Dallas, Iselin (NJ), Miami, New York, Philadelphia and Silicon Valley. On a pro forma basis, revenues for the nine months ended January 2, 1998 were $28.8 million based on service to more than 225 clients during that period. The Company has served a broad range of clients, including Avon Products, Florida Power & Light, Ford Visteon, International Paper and Lucent Technologies. THE OFFERING Common Stock offered by the Company...... shares Common Stock offered by the Selling Stockholders............................ shares Total Common Stock offered............... shares Common Stock outstanding after the Offering................................ shares(1) Use of proceeds.......................... Repayment of indebtedness, working capital, potential acquisitions and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market symbol... ANSR
1 SUMMARY FINANCIAL AND PRO FORMA DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
APRIL 23, 1997 (INCEPTION) TO JANUARY 2, 1998 ------------------------------------ PRO FORMA ACTUAL AS ADJUSTED(2) ---------------- ------------------ STATEMENT OF OPERATIONS DATA: Net revenues............................... $ 14,848 $ 28,817 Loss from operations....................... (8,473) (7,093) Net loss................................... (12,090) (10,567) Net loss per common share--basic and diluted................................... $ (.95) Weighted average common shares outstanding............................... 12,684,637
AS OF JANUARY 2, 1998 ---------------------- ACTUAL AS ADJUSTED(3) ------- -------------- BALANCE SHEET DATA: Working capital.......................................... $ 8,180 Total assets............................................. 28,650 Total long-term liabilities.............................. 12,200 Convertible Preferred Stock.............................. 10,040 Stockholders' equity..................................... $ 846
- - -------- (1) Based on shares of Common Stock outstanding as of , 1998. Excludes shares of Common Stock issuable upon exercise of options outstanding as of , 1998, none of which were then exercisable. (2) Gives effect to (i) the Acquisitions, as defined, (ii) the conversion prior to the Offering (the "Conversion") into a total of 14,320,260 shares of Common Stock of 3,546,732 shares of Class A Convertible Preferred Stock (of which 200,000 were issued after January 2, 1998), par value $.001 per share (the "Class A Preferred") and 33,333 shares of Class B Convertible Preferred Stock, par value $.001 per share issued on March 5, 1998 (the "Class B Preferred" and together with the Class A Preferred, the "Convertible Preferred Stock") and (iii) the sale of Shares of Common Stock in the Offering by the Company at an assumed initial public offering price of $ per Share, and the application of the estimated net proceeds therefrom, which results in a reduction in interest expense of approximately $535,000, as if such events had occurred on April 23, 1997. See "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations--The Acquisitions" and "Index to Financial Statements--Unaudited Pro Forma Consolidated Financial Information." (3) Adjusted to reflect (i) the Conversion and (ii) the sale of Shares of Common Stock in the Offering by the Company at an assumed initial public offering price of $ per Share and the application of the estimated net proceeds therefrom. See "Use of Proceeds." 2 RISK FACTORS In evaluating the Company's business, prospective investors should carefully consider the following factors in addition to the other information presented in this Prospectus before purchasing the shares of Common Stock offered hereby. This Prospectus contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company. Prospective investors are cautioned that such statements are only predictions and that actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider the various factors identified in this Prospectus, including but not limited to the matters set forth below, which could cause actual results to differ materially from those indicated by such forward-looking statements. LIMITED COMBINED OPERATING HISTORY; HISTORY OF LOSSES The Company was formed in April 1997 and has grown substantially since its inception both internally and through acquisitions. Although certain of the acquired businesses have been in operation for some time, the Company has a limited history of combined operations. Consequently, the historical and pro forma information herein may not be indicative of the Company's financial condition and future performance. As a result of the commencement of operations, building infrastructure and the hiring of consultants, the Company had a net loss of $12.1 million for the period from its inception through January 2, 1998. The Company's operating results and financial condition will be adversely affected if revenues do not increase to cover the Company's expanding level of operating expenses. There can be no assurance that the Company will be successful in its efforts to increase its revenues. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." SUBSTANTIAL NON-CASH COMPENSATION EXPENSE The Company will recognize substantial non-cash compensation expense upon the vesting of up to 7,040,000 restricted shares of Common Stock held by seven management employees and one director of the Company. Management expects that these charges will be recognized in the first or second quarters of 1998 upon the occurrence of certain events triggering the vesting of these shares. The trigger events include the Common Stock trading after the Offering at an average closing price in excess of $7.50 per share for any consecutive 30-day trading period. Upon the occurrence of such events, the Company will recognize charges equal to the aggregate fair market value of the shares vesting on such date. Although these charges will be non-cash in nature and will not negatively impact stockholders' equity, they will have a material adverse impact on the Company's reported earnings. The Company believes that the issuance of these shares was critical to its ability to attract and retain qualified personnel during the Company's crucial start-up phase. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview." VARIABILITY OF QUARTERLY OPERATING RESULTS; SEASONALITY The Company expects variations in its revenues and operating results from quarter to quarter. Such variations are likely to be caused by such factors as mix and timing of client projects, completion of client projects, project delays, the number of business days in a quarter, hiring, integration and utilization of consultants and employees, variations in utilization rates and average billing rates for consultants and project managers, the length of the Company's sales cycle, the accuracy of estimates of resources required to complete ongoing projects, the ability of clients to terminate engagements without penalty and the integration of acquired entities. Because a significant portion of the Company's expenses is relatively fixed, a variation in the number or timing of client assignments or in employee utilization rates can cause significant variations in operating results from quarter to quarter and could result in losses to the Company. Unanticipated termination of a major project, a client's decision not to proceed to the stage of the project anticipated by the Company or the completion during a quarter of several major client projects without deploying consultants to new engagements could result in the Company's underutilization of employees and could therefore have a material adverse effect on the Company's business, financial condition and results of operations. In addition, to the extent that increases in the number of professional personnel are not followed by corresponding increases in revenues, the Company's operating results 3 could be materially and adversely affected. Further, it is difficult for the Company to forecast the timing of revenue because project cycles depend on factors such as the size and scope of assignments and circumstances specific to particular clients. Because the Company only derives revenue when its consultants are actually working, its operating results are adversely affected when client facilities close due to holidays or inclement weather. In particular, the Company has generated a smaller proportion of its revenues and lower operating income during the fourth quarter of the year due to the number of holidays in that quarter. Given all of the foregoing, the Company believes that quarter-to-quarter comparisons of its operating results for preceding quarters are not necessarily meaningful and that such results for one quarter should not be relied upon as an indication of future performance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations." MANAGEMENT OF GROWTH The Company is currently experiencing rapid growth that has challenged, and will likely continue to challenge, the Company's managerial and other resources. Since its inception through March 1, 1998, the number of consultants employed by the Company increased to 308 and further significant increases are anticipated during the current year. In addition, the number of active client engagements increased to 112 as of January 2, 1998. The Company has also expanded its geographic coverage to facilities in 10 locations since its inception and intends to continue to expand its geographic coverage and open additional offices in the future. The Company's ability to manage its growth will depend on its ability to continue to enhance its operating, financial and management information systems and to expand, develop, motivate and manage effectively an expanding professional work force. In addition, the Company's future success will depend in large part on its ability to continue to set rates and fees accurately and to maintain high rates of employee utilization and project quality, particularly if the average size of the Company's projects continues to increase. If the Company is unable to manage growth effectively, the quality of the Company's services, its ability to retain key personnel and its business, financial condition and results of operations could be materially adversely affected. Furthermore, there can be no assurance that the Company's business will continue to expand. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." RISKS RELATED TO ACQUISITIONS Since its inception, the Company has significantly expanded through acquisitions. In the future, a key element of the Company's growth strategy will be to pursue additional acquisitions in order to obtain well-trained, high-quality professionals, new service offerings, additional industry expertise, a broader client base or an expanded geographic presence. There can be no assurance that the Company will be able to integrate successfully recent or future acquired businesses without substantial expense, delays or other operational or financial problems or that it will be able to identify, acquire or profitably manage additional businesses. The Company may also require debt or equity financing for future acquisitions that may not be available on terms favorable to the Company, if at all. In addition, acquisitions may involve a number of risks, including diversion of management's attention, failure to retain key acquired personnel, unanticipated events or circumstances, legal liabilities and amortization of acquired intangible assets. Client satisfaction or performance problems at a single acquired firm could have a material adverse impact on the reputation of the Company as a whole. Further, there can be no assurance that the Company's recent or future acquired businesses will generate anticipated revenues or earnings. Any one of these risks could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Growth Strategy." INFLUENCE OF EXISTING STOCKHOLDERS Upon completion of the Offering, the Company's Controlling Stockholders, as defined, together will beneficially own approximately % of the outstanding shares of Common Stock (approximately % if the Underwriters' over-allotment option is exercised in full). As a result, these stockholders, acting together, will be able to control matters requiring approval by the stockholders of the Company, including the election of directors. This concentration of ownership may have the effect of delaying or preventing a change in control of 4 the Company, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices. See "Certain Transactions," "Principal and Selling Stockholders" and "Management-- Directors and Executive Officers." ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS The Company's Certificate of Incorporation and Bylaws, as well as Delaware corporate law, contain certain provisions that could have the effect of delaying, deferring or preventing a change in control of the Company. These provisions could limit the price that certain investors might be willing to pay in the future for shares of the Common Stock. Certain of such provisions allow the Company to issue without stockholder approval preferred stock having rights senior to those of the Common Stock. Other provisions impose various procedural and other requirements that could make it difficult for stockholders to effect certain corporate actions. See "Description of Capital Stock--Certain Anti- Takeover Effects" and "Description of Capital Stock--Preferred Stock." DEPENDENCE ON GENERAL ECONOMIC CONDITIONS Demand for professional IT and consulting services is also significantly affected by the general level of economic activity. When economic activity slows, clients may delay or cancel plans that involve the hiring of IT consultants. The Company is unable to predict the level of economic activity at any particular time, and fluctuations of conditions in the general economy could adversely affect the Company's business, operating results and financial condition. ATTRACTION AND RETENTION OF SKILLED PROFESSIONALS The Company's business involves the delivery of professional services and is labor-intensive. The Company's success depends in large part upon its ability to attract, develop, motivate and retain highly skilled IT professionals and business consultants. Qualified IT professionals and business consultants are in great demand and are likely to remain a limited resource for the foreseeable future. There can be no assurance that the Company will be able to attract and retain sufficient numbers of highly skilled IT professionals and business consultants, and any inability to do so could impair the Company's ability to adequately manage and complete its existing projects and to secure and complete client engagements and as a result could have a material adverse effect on the Company's business, operating results and financial condition. In addition, even if the Company is able to expand its team of highly skilled IT professionals and business consultants, the resources required to attract and retain such employees may adversely affect the Company's operating margins. See "Business--Human Resources." COMPETITION The market for consulting and IT services includes a large number of competitors, is subject to rapid change and is highly competitive. Primary competitors include participants from a variety of market segments, including "Big Six" accounting firms, systems consulting and implementation firms, application software firms, service groups of computer equipment companies, outsourcing companies, systems integration companies and general management consulting firms. Many of these competitors have significantly greater financial, technical and marketing resources and greater name recognition than the Company. The Company also competes with its clients' internal resources, particularly where these resources represent a fixed cost to the client. Such competition may impose additional pricing pressures on the Company. There can be no assurance that the Company will compete successfully with its existing competitors or with any new competitors. In addition, the Company is party to a confidential settlement agreement with a "Big Six" accounting firm resulting from certain litigation which contains certain non-competition and non- solicitation provisions. There can be no assurance that the Company may not be inhibited from soliciting certain potential clients. See "--Litigation and Settlement" and "Business--Competition." 5 PROJECT RISKS; FIXED PRICE CONTRACTS Many of the Company's engagements involve projects that are critical to the operations of its clients' businesses and provide benefits that may be difficult to quantify. The Company's failure or inability to meet a client's expectations in the performance of its services could give rise to claims against the Company or damage the Company's reputation, adversely affecting its business, operating results and financial condition. In addition, most of the Company's contracts are terminable by the client with little or no notice to the Company and without significant penalty. The Company derives a significant portion of its revenues from large client projects involving significant dollar values and the cancellation or significant reduction in the scope of a large engagement could have a material adverse effect on the Company's business, financial condition and results of operations. The Company undertakes certain projects on a fixed-price basis, which is distinguishable from the Company's principal method of billing on a time and materials basis, and undertakes other projects on a capped-fee basis. The failure of the Company to complete such projects within budget or below the cap would expose the Company to risks associated with potentially unrecoverable cost overruns. In addition, even when there is no fixed price or cap the Company's failure or inability to meet a client's expectations with regard to price could result in the refusal of a client to pay, all of which could have a material adverse effect on the Company's business, operating results and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview." CONCENTRATION OF REVENUES Since its inception, the Company has derived a significant portion of its net revenues from a relatively limited number of clients. For example, during the period from its inception through January 2, 1998, the Company's ten most significant clients accounted for approximately 39%, and two clients accounted for 13%, of its net revenues. There can be no assurance that these clients will continue to engage the Company for additional projects or do so at the same revenue levels. Clients engage the Company on an assignment-by-assignment basis, and a client can generally terminate a contract with little or no notice to the Company and without significant penalty. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business-- Clients and Representative Solutions." DEPENDENCE ON PRINCIPAL SERVICE OFFERINGS The Company has derived a substantial portion of its revenues from projects based primarily on package software implementation and, to a lesser degree, Year 2000 issue consulting. Any factors negatively affecting the demand for package software implementation could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, the demand for Year 2000 consulting services is likely to decline as Year 2000 issues are resolved. Although the Company intends to use the business relationships and knowledge of clients' systems obtained in providing Year 2000 consulting or package software implementation services to generate additional projects for these clients, there can be no assurance that the Company will be successful in generating any such additional business. See "Business-- Services." RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON THIRD PARTY SOFTWARE OFFERINGS The Company's success will depend in part on its ability to develop IT solutions that keep pace with continuing changes in IT, evolving industry standards and changing client preferences. There can be no assurance that the Company will be successful in adequately addressing these developments on a timely basis or that, if these developments are addressed, the Company will be successful in the marketplace. In addition, there can be no assurance that products or technologies developed by others will not render the Company's services uncompetitive or obsolete. The Company's failure to address these developments could have a material adverse effect on the Company's business, operating results and financial condition. The Company derives a significant portion of its revenue from projects in which it implements software developed by third parties, such as PeopleSoft, Inc. ("PeopleSoft") and Oracle Corporation ("Oracle"). The 6 Company's future success in its package implementation consulting services depends largely on its relationship with these organizations. There can be no assurance that the Company will continue to maintain a favorable relationship with these software developers. In addition, in the event that PeopleSoft and Oracle are unable to maintain their leadership positions within the business applications software market, if the Company's relationship with these organizations deteriorates, or if these organizations elect to compete directly with the Company, the Company's business, financial condition and results of operations could be materially adversely affected. See "Business--Services." RELIANCE ON KEY EXECUTIVES The success of the Company is highly dependent upon the efforts, abilities, business generation capabilities and project execution skills of its senior leadership team. The loss of the services of any of its senior leadership team for any reason could have a material adverse effect upon the Company's business, operating results and financial condition, including its ability to secure and complete engagements. The Company intends to obtain a key-man insurance policy on Ted A. Fernandez, the Company's President, Chief Executive Officer and Chairman. INTELLECTUAL PROPERTY RIGHTS The Company relies upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect its proprietary rights and the proprietary rights of third parties from whom the Company licenses intellectual property. Although the Company enters into confidentiality agreements with its employees and limits distribution of proprietary information, there can be no assurance that the steps taken by the Company in this regard will be adequate to deter misappropriation of 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 do not infringe on the intellectual property rights of others and that it has all rights necessary to utilize the intellectual property employed in its business, the Company is subject to the risk of claims alleging infringement of third-party intellectual property rights. Any such claims could require the Company to spend significant sums in litigation, pay damages, develop non-infringing intellectual property or acquire licenses to the intellectual property which is the subject of asserted infringement. See "Business--Intellectual Property Rights." LITIGATION AND SETTLEMENT Certain of the Company's key executives and other management employees resigned from a "Big Six" accounting firm during the first quarter of 1997. The accounting firm initiated litigation in connection with such resignations and the formation of the Company arising out of activities alleged to have constituted a breach of non-competition and non-solicitation obligations. This litigation was settled, and the Company, its key executives, certain other management employees and certain of its stockholders are subject to certain provisions contained in a confidential settlement agreement among such persons and the accounting firm (the "Settlement Agreement"). The Settlement Agreement prohibits the Company from soliciting or hiring the accounting firm's employees, and from soliciting or servicing certain of its clients, and prohibits the accounting firm from soliciting the Company's employees, for a period of two years commencing December 31, 1996. Subsequent to the execution of the Settlement Agreement, the accounting firm asserted through legal proceedings that the Company and its executives and employees had conducted activities prohibited by the Settlement Agreement. The Company vigorously denied such assertions, and the accounting firm's claims in these respects were rejected by the court with jurisdiction over the Settlement Agreement. The Company and its executives and management believe that they can operate and grow the Company despite the limitations imposed by the Settlement Agreement. The Company, its key executives and management employees intend to continue to abide by the terms of the Settlement Agreement. There can be no assurance, however, that future claims will not be asserted by the accounting firm. See "Business--Legal Proceedings." 7 SIGNIFICANT UNALLOCATED NET PROCEEDS A substantial majority of the anticipated net proceeds of the Offering has not been designated for specific uses. Therefore, the Company's management will have broad discretion with respect to the use of the net proceeds of the Offering. See "Use of Proceeds." NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE Prior to the Offering, there has been no public market for the Common Stock. Consequently, the initial public offering price per share of the Common Stock will be determined by negotiations among management of the Company and Morgan Stanley & Co. Incorporated ("Morgan Stanley") the representative of the Underwriters (the "Representative"). See "Underwriting" for factors to be considered in determining the initial public offering price per share. Application has been made for quotation of the Common Stock on the Nasdaq National Market; however, there can be no assurance that an active trading market will develop and be sustained after the Offering. The market price of the Common Stock may fluctuate substantially due to a variety of factors, including quarterly fluctuations in results of operations, adverse circumstances affecting the introduction or market acceptance of new services offered by the Company, announcements of new services by competitors, changes in earnings estimates by analysts, changes in accounting principles, sales of Common Stock by existing holders, loss of key personnel and other factors. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has often had a significant effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of these companies. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted against such a company. Any such litigation instigated against the Company could result in substantial costs and a diversion of management's attention and resources, which could have a material adverse effect on the Company's business, operating results and financial condition. IMMEDIATE AND SUBSTANTIAL DILUTION The initial public offering price per share of Common Stock is substantially higher than the net tangible book value per share of the Common Stock. Purchasers of shares of Common Stock in the Offering will experience immediate and substantial dilution of $ in the net tangible book value per share of Common Stock. To the extent outstanding options to purchase the Company's Common Stock are exercised, there will be further dilution. See "Dilution." SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS AGREEMENTS Sales of substantial amounts of Common Stock in the public market following the Offering could adversely affect the prevailing market price of the Common Stock and the Company's ability to raise capital in the future. Upon completion of the Offering, the Company will have a total of shares of Common Stock outstanding, based on an assumed public offering price of $ , of which the Shares offered hereby will be freely tradable without restriction under the Securities Act of 1933, as amended (the "Securities Act"), by persons other than "affiliates" of the Company, as defined under the Securities Act. The remaining shares of Common Stock outstanding are "restricted securities" as that term is defined by Rule 144 promulgated under the Securities Act (the "Restricted Shares"). None of the Restricted Shares will be eligible for sale in the public market on the date of this Prospectus. Following the period ending 180 days after the date of this Prospectus, an additional shares will be eligible for sale in the public market subject to Rule 144 under the Securities Act. See "Shares Eligible for Future Sale--Lock-up Agreements." Following the date of this Prospectus, the Company intends to register on one or more registration statements on Form S-8 approximately shares of Common Stock issuable under its 1998 Stock Option and Incentive Plan (the "Stock Option and Incentive Plan"). Of the shares issuable under the Stock Option and Incentive Plan, shares are subject to outstanding options as of , 1998. See "Management--Stock Plan," "Certain Transactions" and "Shares Eligible for Future Sale." 8 Upon completion of the Offering, the holders of approximately shares of Common Stock will be entitled to certain registration rights with respect to such shares. If such holders, by exercising their registration rights, cause a large number of shares to be registered and sold in the public market, such sales could have an adverse effect on the market price of the Common Stock. In addition, if the Company is required, pursuant to such registration rights, to include shares held by such persons in a registration statement which the Company files to raise additional capital, the inclusion of such shares could have an adverse effect on the Company's ability to raise needed capital. See "Certain Transactions" and "Shares Eligible for Future Sale." 9 THE COMPANY The Company was incorporated on April 23, 1997 as a Florida corporation and will be reincorporated in Delaware immediately prior to the Offering. See "Description of Capital Stock." The Company maintains its principal executive offices at 1001 Brickell Bay Drive, Suite 3000, Miami, Florida 33131. The Company's telephone number is (305) 375-8005 and its Internet address is http://www.answerthink.com. Information contained in the Company's worldwide web site is not a part of this Prospectus. USE OF PROCEEDS The net proceeds to the Company from the Offering are estimated to be $ ($ if the Underwriters exercise their over-allotment option in full), at an assumed initial public offering price of $ per share (the mid-point of the range set forth on the cover of this Prospectus) and after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company will use a portion of the net proceeds to repay $8.2 million borrowed under its credit facility (the "Credit Facility") with BankBoston, N.A. ("BankBoston"), which as of January 2, 1998 bears interest at a weighted average rate of 8.5% per annum. The Company's borrowings under the Credit Facility were used for acquisitions. The Company will also use $3.75 million of the net proceeds to retire a portion of a promissory note, currently bearing interest at the rate of 12.0% per annum, issued to the sole stockholder of the Hackett Group in connection with the Company's acquisition of that entity. The balance of the net proceeds, or approximately $ , will be used for working capital, potential acquisitions and general corporate purposes. The Company does not currently have any agreements, arrangements or understandings with respect to any future acquisitions, and no portion of the net proceeds has been allocated for any specific acquisition. Pending their use as described in this Prospectus, the net proceeds of the Offering will be invested in short-term, interest-bearing, investment-grade securities. The Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Stockholders. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--The Acquisitions" and "-- Liquidity and Capital Resources." DIVIDEND POLICY The Company does not expect to pay any cash dividends on its Common Stock in the foreseeable future. It is the present policy of the Company's Board of Directors to retain earnings, if any, for use in the operation of the Company's business. In addition, under the terms of the Credit Facility, the Company is restricted from paying dividends to its stockholders. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." 10 CAPITALIZATION The following table sets forth the capitalization of the Company as of January 2, 1998 and as adjusted for (i) the Conversion and (ii) to give effect to the sale by the Company of Shares of Common Stock in the Offering at an assumed initial public offering price of $ per Share (the mid-point of the range set forth on the cover of this Prospectus) and the application of the estimated net proceeds therefrom. See "Use of Proceeds." This table is qualified in its entirety by, and should be read in conjunction with, the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
AS OF JANUARY 2, 1998 ------------------------------ AS ADJUSTED FOR THE CONVERSION AND ACTUAL (4) THE OFFERING (5) ---------- ------------------- (IN THOUSANDS) Long-term liabilities........................... $ 12,200 $ -------- ---- Convertible Preferred Stock, $.001 par value, 7,200,000 authorized; 3,346,732 issued and outstanding at January 2, 1998 (1)............. 10,040 -------- ---- Stockholders' equity Common stock, $.001 par value, 100,000,000 authorized; 46,757,184 issued and outstanding (2).......................................... 47 Additional paid-in capital.................... 13,546 Unearned compensation--restricted stock (3)... (657) Accumulated deficit........................... (12,090) -------- ---- Total stockholders' equity.................. 846 -------- ---- Total capitalization...................... $ 23,086 $ ======== ====
- - -------- (1) 3,653,268 shares were issued and converted prior to January 2, 1998. (2) Excludes 1,415,812 shares of Common Stock subject to issuance under options outstanding as of January 2, 1998. (3) Reflects unearned compensation expense, incurred as a result of restricted stock issued to employees of acquired companies. See Note 9 of Notes to Consolidated Financial Statements. (4) Reflects the capital structure of the Company prior to the Reincorporation. (5) Reflects the capital structure of the Company after the Reincorporation. 11 DILUTION The Company's net tangible deficiency at January 2, 1998 was $(11.6 million), or $(.25) per share. Net tangible deficiency per share represents the Company's net tangible deficiency (net tangible assets less total liabilities and Convertible Preferred Stock) divided by the number of shares of Common Stock outstanding, including shares subject to vesting and performance criteria. Without taking into account any other changes in the net tangible book value after January 2, 1998, other than to give effect to the Conversion and sale of shares of Common Stock in the Offering by the Company at an assumed initial public offering price of $ per share, and after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, the net tangible book value of the Company as of January 2, 1998 would have been $ , or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to purchasers of Common Stock in this Offering. The following table illustrates this dilution: Assumed initial public offering price per share............................ $ ---- Increase per share attributable to new investors......................... ---- Net tangible book value per share after the Offering....................... ---- Dilution per share to new investors........................................ $ ====
The following table summarizes, as of January 2, 1998 after giving effect to the Offering, the differences between the number of shares of Common Stock purchased in the Offering, the total consideration paid to the Company and the average price per share paid by the existing stockholders and by the new investors (based upon an assumed initial public offering price of $ per share, before deduction of estimated underwriting discounts and Offering expenses):
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE ----------------- ----------------------- PRICE NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE ------ ---------- ---------- ----------- --------- Existing stockholders..... % $ % $ (1) New investors............. % % --- --- ---------- --------- Total................... % $ % === === ========== =========
- - -------- (1) The average price per share paid by existing stockholders is $ . The foregoing table assumes no exercise of the Underwriters' over-allotment option and no exercise of stock options outstanding as of January 2, 1998. As of January 2, 1998, there were options outstanding to purchase 1,415,812 shares of Common Stock at an average exercise price of $1.25. To the extent any of these options are exercised, there will be further dilution to new investors. See "Risk Factors--Shares Eligible for Future Sale; Registration Rights Agreements." 12 SELECTED CONSOLIDATED FINANCIAL AND PRO FORMA DATA The following selected consolidated financial data for the period from April 23, 1997 (inception) to January 2, 1998 (the "Inception Period") and as of January 2, 1998 are derived from the Company's Consolidated Financial Statements and related Notes thereto, which have been audited by Coopers & Lybrand L.L.P., independent accountants and which appear elsewhere in this Prospectus. The following selected pro forma financial data are derived from the Company's Unaudited Pro Forma Consolidated Financial Information appearing elsewhere in this Prospectus. The Pro Forma Statement of Operations Data for the Inception Period give effect to the Acquisitions as if they had been completed on April 23, 1997. As adjusted information gives effect to the Conversion and completion of the Offering at an assumed initial public offering price of $ per share and the application of the estimated net proceeds therefrom. The selected consolidated financial data should be read in conjunction with the Company's Consolidated Financial Statements and related Notes thereto and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the pro forma financial data should be read in conjunction with the Unaudited Pro Forma Consolidated Financial Information of the Company and the related notes thereto. Management believes the assumptions used in the Unaudited Pro Forma Consolidated Financial Information provide a reasonable basis on which to present the pro forma financial data. The pro forma financial data are provided for informational purposes only and should not be construed to be indicative of the Company's financial position or results of operations had the transactions and events described in the notes thereto been consummated on the dates assumed and are not intended to project the Company's financial condition or results of operations on any future date or for any future period.
APRIL 23, 1997 (INCEPTION) TO JANUARY 2, 1998 --------------------------------------- PRO FORMA ACTUAL AS ADJUSTED(1) ----------------- -------------------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) CONSOLIDATED STATEMENT OF OPERATIONS DATA: Net revenues............................. $ 14,848 $ 28,817 Costs and expenses: Project personnel and expenses......... 13,333 20,002 Selling, general and administrative.... 8,085 14,005 Settlement costs....................... 1,903 1,903 ----------------- -------------- Total costs and operating expenses... 23,321 35,910 ----------------- -------------- Loss from operations................... (8,473) (7,093) Other income (expense): In-process research and development technology............................ (4,000) (4,000) Interest income........................ 498 526 Interest expense....................... (115) -- ----------------- -------------- Net loss................................. $ (12,090) $ (10,567) ================= ============== Net loss per common share--basic and diluted............................... $ (.95) $ ================= ============== Weighted average common shares outstanding............................. 12,684,637
13
AS OF JANUARY 2, 1998 ---------------------- ACTUAL AS ADJUSTED(2) ------- -------------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital.......................................... $ 8,180 Total assets............................................. 28,650 Total long-term liabilities.............................. 12,200 Convertible Preferred Stock.............................. 10,040 Total stockholders' equity............................... $ 846
- - -------- (1) Gives effect to (i) the Acquisitions, (ii) the Conversion and (iii) the sale of Shares of Common Stock in the Offering by the Company at an assumed initial public offering price of $ per Share and the application of the estimated net proceeds therefrom which results in a reduction in interest expense of approximately $535,000. See "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations--The Acquisitions" and "Index to Financial Statements--Unaudited Pro Forma Consolidated Financial Information." (2) Adjusted to reflect (i) the Conversion and (ii) the sale of Shares of Common Stock in the Offering by the Company at an assumed initial public offering price of $ per Share and the application of the estimated net proceeds therefrom. See "Use of Proceeds." 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW AnswerThink is a rapidly growing provider of knowledge-based consulting and IT services to Fortune 1000 companies and other sophisticated buyers. The Company began operations on April 23, 1997. The Company's primary activities during its initial stages consisted of recruiting consultants and developing and building a service delivery model and the underlying information systems to support the future growth of the business. Concurrent with this effort, the Company embarked on an aggressive acquisition strategy that resulted in three significant acquisitions during 1997 (the "Acquisitions"). The Company's operations during the Inception Period resulted in a loss of $12.1 million which was attributable to the developmental nature of the business during the start-up phase and to a $4.0 million charge for in-process research and development technology recognized in connection with AnswerThink's acquisition of the Hackett Group. The Company recognizes revenues on contracts as work is performed, principally on a time and materials basis. For projects billed on a time and materials basis, the Company recognizes revenue based on the number of hours worked by consultants at an agreed-upon rate per hour. The Company believes the financial risk under these types of arrangements is mitigated by the fact that clients retain the financial risk associated with implementing projects. The Company also undertakes certain projects, usually short-term, on a capped-fee basis for which revenues are recognized on a percentage of completion method based on project hours worked. The Company anticipates that the majority of its work will continue to be performed on a time and materials basis. See "Risk Factors--Project Risks; Fixed Price Contracts." The Company's revenue growth is directly tied to its ability to attract and retain new consultants to service its increasing client base. The most significant expense for the Company is the project personnel and related costs associated with its consultants. The market for skilled consultants is highly competitive and is characterized by very high demand with a relatively small pool of qualified personnel. The ability of the Company to manage consultant utilization, contain payroll costs and control employee turnover costs in light of these market forces will have a significant impact on its profitability. To help address these concerns, the Company grants restricted shares of Common Stock or Common Stock options to all employees including those of acquired companies. Awards of restricted stock and stock options generally vest over four to six years. The Company will recognize substantial non-cash compensation expense if certain future events occur which will result in the vesting of certain restricted shares of Common Stock. In connection with the formation of the Company, (i) five of the Company's senior managers and one director received 5,440,000 restricted shares of Common Stock which will vest (a) in their entirety at such time following completion of the Offering as the average closing price per share of the Common Stock exceeds $7.50 per share for any consecutive 30-day trading period, or (b) in whole or in part, but not later than April 23, 2003, upon a change of control or a sale of all or substantially all of the Company's assets tied to certain target rates of return received by certain investors in the Company, and (ii) two managing directors of separate business units of the Company each received 800,000 restricted shares of Common Stock, which will vest upon the occurrence of (a) or (b) above, and the achievement by such managing director's business unit of certain revenue targets prior to June 30, 2000. In the event the restricted shares held by any of these eight individuals vest, the Company will recognize a non-cash compensation charge on the date such shares vest equal to the aggregate fair market value of the shares vesting on such date. Management expects that these charges will be recognized in the first or second quarter of 1998. Although these charges will be non-cash in nature and will not negatively impact stockholders' equity, they will have a material adverse impact on the Company's reported earnings. The Company believes that such issuances were critical to its ability to attract and retain qualified personnel during the Company's crucial start-up phase. See "Risk Factors--Substantial Non-Cash Compensation Expense." 15 THE ACQUISITIONS All acquisitions completed by the Company have been accounted for under the purchase method of accounting. Accordingly, the historical Consolidated Financial Statements of the Company include the operating results of the acquired businesses from the date of each respective acquisition. On August 1, 1997, the Company acquired Relational Technologies, Inc. ("RTI"), a Georgia-based information technology consulting and Oracle software implementation company. RTI focuses on the implementation of Oracle manufacturing, financial and human resources applications. Through the acquisition of RTI, the Company became an Oracle Business Alliance Member, which enables the Company to market Oracle applications products to its customers. RTI was acquired for 2,441,400 restricted shares of Common Stock issued to RTI's shareholders. On October 13, 1997, the Company completed its acquisition of the Hackett Group, an Ohio-based consulting firm specializing in benchmarking and process transformation. The Hackett Group, through its proprietary "best-practice" database focuses on the efficiency of such organizational functions as finance, human resources, IT services and supply chain management. The Company acquired all of the Hackett Group's outstanding shares from its sole stockholder, Gregory P. Hackett. The original purchase price was paid in the form of $6.5 million in cash, a $5.1 million promissory note, and 888,000 restricted shares of Common Stock. The note and the restricted shares were subject to certain earn-out provisions. On March 12, 1998, Mr. Hackett and the Company amended the terms of the acquisition to waive the earn-out provisions. On November 12, 1997, the Company acquired all the outstanding shares of Delphi Partners, Inc., ("Delphi"), a New Jersey-based PeopleSoft application solutions and information technology consulting company. Delphi focuses on the implementation of PeopleSoft financial, human resources and manufacturing applications. Through the acquisition of Delphi, the Company became a PeopleSoft Implementation Partner. The total acquisition consideration paid consisted of $7.4 million in cash and 1,120,000 restricted shares of Common Stock issued to Delphi shareholders. The sellers of Delphi will also receive up to $2.5 million to be paid by April 30, 1999 upon the achievement of certain pre-tax profit targets related to the performance of Delphi during 1998. RESULTS OF OPERATIONS In order to highlight the impact of the developmental activity during the start-up phase of the business and the timing and size of the Acquisitions, selected unaudited quarterly data are presented herein for a more meaningful analysis of the Company's operating results for the Inception Period. The following table sets forth, for the periods indicated, the Company's unaudited results of operations and the percentage relationship to net revenues of such results. This information has been prepared on the same basis as the Consolidated Financial Statements and, in the opinion of the Company's management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the periods presented.
APRIL 23, 1997 THREE MONTHS ENDED APRIL 23, 1997 (INCEPTION) -------------------------------- (INCEPTION) TO JUNE 30, SEPTEMBER 30, JANUARY 2, TO JANUARY 2, 1997 1997 1998 1998 ----------------- --------------- -------------- --------------- (IN THOUSANDS, EXCEPT PERCENTAGE DATA) Net revenues............. $ 62 100.0% $ 2,698 100.0 % $12,088 100.0 % $ 14,848 100.0 % Costs and expenses: Project personnel and related expenses....... 1,616 nm 3,730 138.3 7,987 66.1 13,333 89.8 Selling, general and administrative......... 1,290 nm 2,932 108.7 3,863 32.0 8,085 54.5 Settlement costs........ 1,756 nm 125 4.6 22 0.1 1,903 12.8 -------- ------ ------- ------ ------- ----- -------- ----- Total costs and operating expenses..... 4,662 nm 6,787 251.6 11,872 98.2 23,321 157.1 Income (loss) from operations.............. (4,600) nm (4,089) (151.6) 216 1.8 (8,473) (57.1) In-process research and development technology.. -- -- -- -- (4,000) (33.1) (4,000) (26.9) Interest income (expense), net.......... 252 406.5 194 7.2 (63) (0.5) 383 2.6 -------- ------ ------- ------ ------- ----- -------- ----- Net loss................. $ (4,348) nm $(3,895) (144.4)% $(3,847) (31.8)% $(12,090) (81.4)% ======== ====== ======= ====== ======= ===== ======== =====
16 Net Revenues. Net revenues for the Inception Period were $14.8 million. The Company achieved month-to-month net revenue increases by increasing the number of services delivered to new clients, as well as leveraging the Company's existing client base by undertaking additional projects for these clients. The number of active clients served increased from one at June 30, 1997, to 27 at September 30, 1997 and to 112 at January 2, 1998. Net revenues increased during the three months ended September 30, 1997 primarily as a result of the acquisition of RTI. The net revenues increase during the three months ended January 2, 1998 resulted from the acquisitions of the Hackett Group and Delphi, as well as an increase in the total number of clients served. Project Personnel and Related Expenses. During its start-up phase, the Company invested a significant amount of project resources to develop its service delivery model and the related management information systems in order to position the Company for future growth. Project personnel and related expenses amounted to $13.3 million, or 89.8% of net revenues, for the Inception Period. The Company increased the number of project personnel through recruiting efforts and the Acquisitions. The Company grew to 37 project personnel at June 30, 1997, to 142 at September 30, 1997 and to 267 at January 2, 1998. Project personnel and related expenses as a percent of net revenues decreased over each three-month period and was 66.1% for the three months ended January 2, 1998. The decrease in project personnel and related expenses as a percentage of net revenues resulted primarily from higher utilization as the personnel of the acquired entities were already deployed to existing clients. Selling, General and Administrative. Selling, general and administrative expenses for the Inception Period totaled $8.1 million, or 54.5% of net revenues. Functional support personnel increased from 12 at June 30, 1997, to 37 at September 30, 1997 and to 63 at January 2, 1998. This increase and resulting personnel costs were incurred to create an infrastructure that could support a rapidly growing organization with the ability to integrate strategic acquisitions. The primary expenditures were made in the sales and marketing and recruiting and service delivery systems functions. Selling, general and administrative expenses as a percent of net revenues decreased significantly over each three-month period and were 32.0% for the three months ended January 2, 1998. The decrease in selling, general and administrative expenses as a percentage of net revenues resulted primarily from the lower level of selling, general and administrative costs incurred by the acquired companies. Settlement Costs. Settlement costs totaled $1.9 million, or 12.8% of net revenues, for the Inception Period. Settlement costs consisted primarily of (i) payments to certain key executives and certain other management employees of the Company relating to the obligations assumed by the Company for compensation earned during the period from December 1, 1996 to the date of the Company's inception (the "Dispute Period") by such employees, and (ii) legal fees incurred in connection with the ensuing litigation. See "Business--Legal Proceedings." The substantial majority of these costs were incurred during the first three months of the Company's operations before the matter was settled. In-process Research and Development Technology. The in-process research and development technology charge of $4.0 million resulted from the acquisition of the Hackett Group. This charge was recorded during the quarter ended January 2, 1998 and is considered a non-recurring item. Interest Income (Expense), Net. Net interest income amounted to $383,000, or 2.6% of net revenues, for the Inception Period. The majority of the interest income was earned in the first six months of the Company's operations as the initial capitalization of the Company was placed in short-term investments. The invested cash and borrowed funds were used to complete the Hackett Group and Delphi acquisitions mentioned previously, thereby causing the Company to be a net borrower of funds for the three months ended January 2, 1998. AVAILABILITY OF NET OPERATING LOSSES The Company generated a tax loss of approximately $8.0 million during the Inception Period. Current accounting standards require that future tax benefits, such as net operating losses, be recognized to the extent that realization of such benefits is more likely than not. In light of the loss experienced during the Inception Period, a valuation allowance has been established for the entire amount of the net operating loss carryforward. 17 LIQUIDITY AND CAPITAL RESOURCES The Company was formed in April 1997 with $20.4 million of capital raised through the issuance of Class A Preferred to the Initial Investors, as defined. The Company issued additional shares of Class A Preferred in July 1997 to certain executives for $600,000. Subsequent to January 2, 1998, the Company issued additional shares of Class A Preferred to certain of the Initial Investors and their affiliates for aggregate consideration of $600,000. Immediately prior to the Reincorporation, each outstanding share of Class A Preferred will be converted into four shares of Common Stock. See "Description of Capital Stock" and "Shares Available for Future Sale." In connection with the acquisition of the Hackett Group, the Company issued a $5.1 million promissory note to the sole stockholder of the Hackett Group, subject to certain earn-out provisions. This note is payable in three separate installments. The first installment obligation is $3.75 million, bears interest at a rate of 12% per annum and was originally due March 31, 1998. The second installment obligation of $497,000 is due March 31, 1999, and the third installment obligation of $896,000 is due March 31, 2000. The obligations for the second and third installment payments bear interest at a rate of 8% per annum. In connection with the amendment to the terms of the Hackett Group acquisition on March 12, 1998, Mr. Hackett agreed to extend the due date on the $3.75 million installment from March 31, 1998 to the earlier of the completion of the Offering or January 15, 1999, and the Company agreed to waive the earn-out provisions. The Company intends to repay that obligation with a portion of the proceeds from the Offering. See "Use of Proceeds." On November 7, 1997, the Company entered into an agreement with BankBoston, N.A., for a $10.0 million revolving credit facility for acquisitions, which amount could be increased to $20.0 million if certain future earnings and performance criteria are satisfied. The Credit Facility is secured by substantially all of the Company's assets and contains certain restrictive covenants. Amounts outstanding under the Credit Facility will be repaid with a portion of the proceeds of the Offering. At January 2, 1998, the Company had an outstanding balance of $8.2 million at a weighted average annual interest rate of 8.5% under the Credit Facility. On March 5, 1998, the Company issued 33,333 shares of Class B Preferred for aggregate consideration of $500,000 to an affiliate of BankBoston. Immediately prior to the Reincorporation, each outstanding share of Class B Preferred will be converted into four shares of Common Stock. As part of the Acquisitions, the Company utilized approximately $12.7 million of cash, net of cash acquired, to complete the purchases of the Hackett Group and Delphi stock in October and November, 1997 respectively. Additionally, the Company invested approximately $2.1 million in computer hardware and software and telecommunications equipment to develop its infrastructure in support of future growth plans. During the Inception Period, net cash used by the Company in operating activities amounted to approximately $11.2 million, principally to cover operating losses and to fund working capital. At January 2, 1998, the Company had cash and cash equivalents of approximately $3.2 million. The Company believes that the proceeds from the Offering and funds available under the Credit Facility or that may be generated from operations will be sufficient to finance the Company's currently anticipated working capital requirements through the end of 1998. There can be no assurance, however, that the Company's actual needs will not exceed anticipated levels or that the Company will generate sufficient revenues or have sufficient funds available under the Credit Facility to fund its operations in the absence of other sources. There also can be no assurance that any additional required financing will be available through additional bank borrowings, debt or equity offerings or otherwise, or that if such financing is available, that it will be available on terms favorable to the Company. YEAR 2000 ISSUE Many existing computer programs were designed and developed without considering the impact of the upcoming change in the century and consequently use only two digits to identify a year in the date field. If not corrected, many computer applications could fail or create erroneous results by or at the Year 2000 (the "Year 2000 Issue"). All of the Company's systems have been recently implemented and are Year 2000 compliant. The Company believes the Year 2000 Issue will not have a material adverse impact on the Company's financial condition or results of operation. 18 BUSINESS AnswerThink is a rapidly growing provider of knowledge-based consulting and IT services to Fortune 1000 companies and other sophisticated buyers. The Company addresses its clients' strategic business needs by offering a wide range of integrated services or solutions, including benchmarking, process transformation, software package implementation, electronic commerce, decision support technology, technology architecture and integration and Year 2000 solutions. These solutions target a client's specific business functions (finance and administration, human resources, IT, sales and customer support, and supply chain management) and allow a business to reach beyond the enterprise and link the people, processes and technologies of the extended organization or "Interprise." AnswerThink markets its services to senior executives in organizations where business transformation and technology- enabled change can have a significant competitive impact. AnswerThink leverages its knowledge base to propose solutions to its clients' most critical and complex business problems. The Company delivers its services through multidisciplinary project teams that include professionals with both IT and business expertise. The Company's knowledge-based approach to consulting combines the knowledge and experience of its consultants with "best-practice" process solutions and a benchmarking database developed by the Hackett Group. The Company believes its highly focused service delivery model provides its customers with a lower risk of delivery and a faster time to benefit as compared to the linear, "methodology based" processes employed by many other IT consulting firms. The Company was formed in April 1997 by several former leaders of the IT consulting practice of a "Big Six" accounting firm. From the outset, the Company made operational investments to develop a comprehensive market strategy, build a business infrastructure and create sophisticated management information and service delivery systems capable of supporting a large-scale consulting and IT services business. Since its formation, AnswerThink has acquired several consulting and IT services businesses, each of which brought to the Company complementary skills and customer relationships. In addition, the Company has grown internally by recruiting more than 150 consultants. As of March 1, 1998, the Company employed 308 consultants. The Company supports its national solution delivery organization through a network of 10 offices located in Atlanta, Boston, Chicago, Cleveland, Dallas, Iselin (NJ), Miami, New York, Philadelphia and Silicon Valley. On a pro forma basis, net revenues for the Inception Period were $28.8 million based on service to more than 225 clients during that period. The Company has served a broad range of clients, including Avon Products, Florida Power & Light, Ford Visteon, International Paper and Lucent Technologies. INDUSTRY OVERVIEW In today's climate of intense global competition and accelerating technological change, companies are increasingly turning to technology-enabled solutions to improve their productivity and competitive positioning. In this environment, IT is viewed not as an isolated back office function but rather as a critical component of organizational strategy. IT deployment decisions are increasingly made on an enterprise-wide level by senior executives. The migration of technology from the back office to desktops throughout the enterprise has created a wide range of business opportunities. Data that was once collected nightly or weekly and used to analyze events retrospectively can now be deployed to manage an entire enterprise in real time. Custom-developed software that once produced reports that allowed managers to analyze what had happened is being replaced by enterprise-wide packaged software applications capable of linking manufacturing, sales, distribution and finance functions and helping decision-makers shape what will happen. This enterprise-wide software is being deployed in geographically dispersed, complicated technology environments. The multitude of different protocols, operating systems, devices and architectures makes deployment of technology solutions a difficult challenge. Companies must also continually keep pace with new developments, which often render existing equipment and internal skills obsolete. At the same time, external economic factors have forced organizations to focus on core 19 competencies and trim workforces. Accordingly, these organizations often lack the quantity or variety of IT skills necessary to design and implement comprehensive IT solutions. The shortage of skilled IT professionals and the complexity of IT solutions have pushed senior executives to increasingly rely on outside specialists to help them execute IT strategies and, as a result, demand for consulting services is expected to continue to grow rapidly. According to industry sources, the worldwide market for IT consulting and system integration services was estimated at $53.7 billion in 1996 with a projected market of $96.3 billion for 2001, a 12.4% growth rate. In addition, the domestic IT consulting and system integration service market is projected to grow from $26.0 billion in 1996 to $48.3 billion in 2001, a 13.2% growth rate. Although the market for IT services is robust, the Company believes that many buyers are investing heavily in IT solutions that are not yielding the desired benefits or that are not being implemented on time. Generally, companies who turn to IT consultants to help implement these investments choose between "tactical" solution providers and larger organizations such as the "Big Six" accounting firms that offer more comprehensive services. The Company believes that tactical solution providers which focus on limited functionality requirements (such as application development and staff augmentation) often do not address broader strategic business and IT goals that are critical to the customer and the success of the IT solutions implemented. At the same time, the Company believes that larger IT consulting firms, with their complex or fragmented organizational models, high turnover rates and use of linear "methodology-based" processes (which propose solutions only after extensive studies of a particular client's business problems), often fail to deliver the right IT solutions on time and on budget. In AnswerThink's view, companies today require strategic service providers that have a comprehensive understanding of the relevant business issues, the ability to design and implement integrated solutions that can help them meet their strategic business goals as they evolve and the skills and tools necessary to deliver solutions in a timely and cost-effective manner. THE ANSWERTHINK SOLUTION AnswerThink does more than just study problems. It identifies and answers the questions at the outset of an engagement which allow it to propose and implement solutions on time and on budget. By using its knowledge-based delivery process and employing experienced, multidisciplinary consulting teams, the Company is able to reduce both the risk of delivery and time of implementation of its projects. The Company believes this approach appeals to senior executives seeking solutions to complex business and IT problems. Key elements of AnswerThink's strategic IT services delivery approach are: . Senior Leadership and Delivery Expertise. AnswerThink's leadership team has extensive experience in providing IT consulting and system integration services. AnswerThink's executive officers and senior managers have, on average, 15 years of experience in consulting and in the delivery of IT services. The Company's practice area leaders have built strong reputations in their areas of expertise. The Company has leveraged this experience to build an organizational model, market strategy and knowledge-based service delivery process enabling the Company to deliver highly-focused, results-oriented, comprehensive IT solutions for sophisticated buyers of technology-enabled solutions. . Interprise Focus. The Company believes that success in today's business environment requires excellence in communication and collaboration, not just within the corporate enterprise, but across the network of customers, suppliers, strategic partners and others which together form the extended enterprise--what the Company refers to as the "Interprise" business model. AnswerThink provides IT solutions to help its clients succeed in this Interprise environment, which demands the assimilation and integration of data from both internal and external sources. . Multidisciplinary Solution Teams. IT service providers must understand underlying business issues so they can better design, implement and integrate effective IT solutions. AnswerThink provides solutions in the areas of process transformation and benchmarking, software package implementation and advanced technologies integration. AnswerThink delivers these solutions through multidisciplinary teams of professionals with experience in these areas that deliver solutions for each of the specific business 20 functions in an organization. These teams target finance, administration and human resources ("CFO | solutionsSM"), information technology ("CIO | solutionsSM"), sales and customer support ("Customer | solutionsSM"), and supply chain management ("Interprise Supply Chain | solutionsSM"). By assembling multidisciplinary teams of professionals for an engagement, the Company believes it can provide superior technology-enabled solutions to its clients. . Knowledge-based Delivery. AnswerThink, primarily through its Hackett Group, has developed and continuously refines a proprietary database of "best-practice" organizational solutions and benchmarks from more than 1,100 companies. This database enables AnswerThink to identify for its clients areas of strength and weakness in their organizations relative to their peers. Relevant aspects of this accumulated knowledge can be incorporated quickly into the Company's analysis for new engagements, allowing AnswerThink to provide proven and effective solutions. In addition, AnswerThink's internal information systems and corporate culture enable it to capture knowledge from previous consulting engagements and share it throughout the organization to allow AnswerThink to identify and solve the problems of other clients in future engagements. The Company is in the final stages of developing and employing MindShareSM, a proprietary intranet knowledge management system that will capture, index and disseminate the combined knowledge and experiences of its consultants. GROWTH STRATEGY The Company's goal is to become a leading global provider of knowledge-based consulting and IT services. AnswerThink's strategy to achieve this goal includes the following elements: . Maintain a Culture Designed for Rapid Growth. The Company believes that its dynamic, entrepreneurial culture is particularly attractive to consultants seeking new, non-traditional work environments. The Company recognizes that to be a leading global consulting and IT services organization, it must continue to recruit and, more importantly, retain qualified and experienced professionals with the consulting and IT skills currently in high demand. Many AnswerThink consultants were previously employed at traditional consulting and IT services firms. The Company recruits and retains consultants by offering attractive base and incentive compensation packages that include equity ownership opportunities. All AnswerThink employees currently have an equity interest in the Company. . Develop and Expand Client Relationships. AnswerThink has developed a direct, high-level sales organization that encourages its sales professionals to pursue, establish and maintain close relationships with senior management of Fortune 1000 companies. Since inception, AnswerThink has provided consulting and other IT services to Fortune 1000 companies including engagements for limited types of services for a single division or business unit. With its growing service offerings, experienced management and the structure of its sales organization, the Company believes that it has a significant advantage in cross-selling additional services and solutions to its client base. A number of clients have expanded their relationship with AnswerThink both in terms of revenue and types of services purchased. In addition, the Company intends to target new clients by (i) continuing to leverage and expand the Company's direct sales force, (ii) increasing the hiring of consultants with existing client relationships and (iii) pursuing referrals from existing clients and third-party organizations including hardware partners, software partners and industry research organizations. . Leverage and Expand Scalable Infrastructure. AnswerThink's senior management team has extensive experience managing a large-scale IT services organization. Since inception, the Company has invested in the development of service delivery processes and the underlying systems to build the foundation for a global consulting and IT services company. In addition, AnswerThink has invested significant resources to capture and retain critical information by developing its knowledge management system, MindShareSM, which will enhance collaboration and communication among its employees. The Company intends to leverage and expand its infrastructure to increase the number of its consulting professionals, geographic coverage, client base and scope of engagements. . Expand Service Offerings. At its inception, the Company defined a framework of services and capabilities that it would need to become a leading global consulting and IT services company. 21 AnswerThink has systematically added service capabilities both internally and through acquisitions in several business lines, such as the addition of Oracle and PeopleSoft packaged software implementation services and the Company's development of a supply chain management implementation business unit. The Company intends to continue to add service offerings through acquisitions and additional hiring. In addition, the Company plans to continually evaluate "best-of-breed" technologies in order to provide high-impact IT solutions to keep pace with changes in technology. . Pursue Strategic Acquisitions and Partnerships. The Company has completed and intends to continue to pursue strategic acquisitions that will provide additional well-trained, high-quality professionals, new service offerings, additional industry expertise, a broader client base and an expanded geographic presence. Since inception, the Company has successfully made three significant acquisitions. In addition, the Company currently has strategic relationships with a number of business partners, including Oracle, PeopleSoft, International Business Machines Corporation ("IBM") and Netscape Corporation ("Netscape"), among others. The Company intends to expand and develop its relationships with business partners serving the IT market to benefit from joint marketing opportunities and shared technical and industry knowledge. THE ACQUISITIONS Since inception, the Company has made three significant acquisitions. . Relational Technologies, Inc. The Company acquired RTI in August 1997. As a result of the RTI acquisition, the Company provides Oracle application services to its clients for Oracle Financials, Oracle HR, Oracle Distribution and Oracle Manufacturing. The Company is also able to provide technical services such as systems selection, installation and maintenance, communications management and network consolidations of Oracle products. . The Hackett Group, Inc. The Company acquired the Hackett Group in October 1997. The Hackett Group is a nationally recognized benchmarking and best- practices firm focused on creating a proprietary database which catalogues the efficiency and effectiveness of knowledge-worker functions, such as finance, human resources, information technology and supply chain management. The Hackett Group has gathered data from more than 1,100 companies, including more than 40% of the Fortune 100. The Hackett Group's benchmark participants share cost, productivity and practices information on specific organizational functions. This data is collected into a database that allows the Hackett Group to compare its clients' performance to other companies' performance on specific criteria and to identify the most effective management strategies for change. . Delphi Partners, Inc. The Company acquired Delphi in November 1997. As a result of this acquisition, the Company is a PeopleSoft Implementation Partner and provides clients implementing PeopleSoft client/server financial, human resources and manufacturing applications with a broad range of services, including implementation management consulting, application design and development, customized end user training and documentation, process redesign and automated workflow and technology integration and support. SERVICES The Company offers its services or solutions in three principal areas: (i) "best-practice" benchmarking and business process transformation, (ii) "best- of-breed" packaged software implementation and (iii) advanced technologies integration. The Company delivers those services and solutions to its clients through the Company's CFO | solutionsSM, CIO | solutionsSM, Customer | solutionsSM and Interprise Supply Chain | solutionsSM multidisciplinary teams. The Company's current consulting capabilities are summarized below. Benchmarking and Business Process Transformation. In the area of benchmarking and business process transformation, the Company works with clients to compare their performance to other companies, identify key business issues and develop and implement new processes to transform their organizations. 22 . Benchmarking | solutionsSM. The Company, through the Hackett Group, works with large national and multinational corporations in evaluating their staff functions (such as finance, human resources, IT and supply chain management), and has compiled databases on a large number of companies in a wide variety of industries. Using these databases, the Company collects information from its clients, identifies benchmarks by which its clients can evaluate their performance on specific criteria relative to other companies and identifies the most effective strategies for specific functions in a given industry. Each benchmark is composed of the following three elements: (i) a quantitative analysis of costs, productivity, service, quality and effectiveness; (ii) an understanding of world-class best-practices; and (iii) opportunities to learn from best-practices companies. Stringent process definitions and controls enable comparisons to be made between companies with different attributes and across industries. Clients can receive a detailed, confidential evaluation of their performance measured against other benchmarks on the basis of business focus (e.g., manufacturing, service or distribution), size, organizational structure and geography. Since benchmark studies often lead to clients implementing revised IT strategies, the Company believes that it is well positioned to cross-sell its services. . Transformation | solutionsSM. The Company works with its clients to conceive, design and manage processes, organizations and systems necessary to implement technology-enabled business solutions. There are four key components to the Company's transformation solutions: Performance Assessment. The Company helps clients gain a systematic and objective understanding of the relative strengths and weaknesses of key aspects of their businesses, identify market trends and best- practices, and highlight those areas that offer the greatest opportunity for improvement. The Company works with clients to define and apply appropriate measures, and compare their performance to appropriate benchmarks. Business Redesign. The Company aids clients in defining an end-state vision of what their businesses require to achieve their primary performance objectives. Once that vision is established, AnswerThink helps clients identify and select the best strategies for achieving their objectives. AnswerThink's process redesigns generally affect all of a company's key processes, organizations, management practices, people and technology, taking full advantage of enabling technologies and reflecting both recognized best-practices and emerging trends. Migration Planning. The Company's work in the area of migration planning is focused on (i) deploying systems and infrastructure hardware and software as planned, (ii) initiating systems management and other delivery processes and (iii) initiating performance measurement and other management processes. The Company's migration planning services help clients to structure the process into a series of change initiatives and develop alternative scenarios for the staging and sequencing of those initiatives. The comparison and refinement of these scenarios on the basis of costs, benefits and risks leads to agreement on a master plan which details projects, schedules, responsibilities, funding and expected business results. Program Management. The Company establishes a single point of coordination for all initiatives contributing to the transformation process, including process redesign, organizational change, system implementation and infrastructure enhancement. AnswerThink applies proven project management disciplines, tools, techniques and systems to the management of complex transformation programs. Packaged Software Implementation. In the area of packaged software implementation, the Company works with its clients to identify and integrate "best-of-breed" solutions such as: . Oracle | solutions. AnswerThink is a Business Alliance Member with Oracle, one of the world's leading suppliers of software for information management. Oracle's enterprise automation products include applications modules for financial management, supply chain management, manufacturing, project systems, human resources, and sales force automation. The Company serves as a sole source provider for procuring Oracle's packaged software, complementary hardware, and AnswerThink's related consulting and IT services. The Company's Oracle-based solutions support the full life cycle implementation of Oracle and involve project-planning, definition and management, configuration and implementation. 23 . PeopleSoft | solutions. The Company is a PeopleSoft Implementation Partner. PeopleSoft offers a complete suite of enterprise software applications that automate business processes including finance, materials management, manufacturing, distribution, supply chain planning, accounting and human resources. PeopleSoft's offerings also include a rapid application development and reporting environment and customization toolset. The Company's PeopleSoft-based solutions support the full life cycle implementation of PeopleSoft and involve project-planning, definition and management, configuration and implementation. . Other Applications. The Company also provides comprehensive consulting and IT services supporting the full life cycle implementation, including project planning, definition and management, and application configuration and implementation, for such software applications as Baan (Aurum), Manugistics, i2 Technologies, Siebel, Point, Clarify and Scopus. Advanced Technologies Integration. The Company helps clients to achieve meaningful improvement in all aspects of their IT strategies by providing the following services: . Knowledge | solutionsSM. The Company provides consulting, design and implementation services focused on enhancing intellectual capital and knowledge resources across its clients' expanded enterprises. The Company's knowledge solutions emphasize decision support, data warehousing and knowledge management strategy and process design, content storage and navigation concepts, and related enabling technologies including groupware, collaborative tools and advanced knowledge-sharing environments. . Electronic Commerce | solutionsSM. The Company designs and develops internet, intranet and extranet solutions, with an emphasis on business- to-business digital commerce, messaging architectures, intranet enabled data warehouses, web-based transaction facilities and internet and extranet security. . Systems | solutionsSM. The Company evaluates, designs and implements complex enterprise-wide networks, large scale client/server technology, systems and network integration solutions focused on systems management and performance. . Millennium | solutionsSM. The Company designs and implements solutions to address the millennium challenge, focusing on applications assessment, Year 2000 testing and remediation strategy and active integration management. 24 As illustrated on the following chart, the Company's solutions are marketed across targeted business functions and are delivered through multidisciplinary solution teams that focus on different aspects of an organization's business and IT needs.
INTERPRISE SUPPLY CFO | SOLUTIONSSM CIO | SOLUTIONSSM CUSTOMER | SOLUTIONSSM CHAIN | SOLUTIONSSM ------------------ ------------------- ----------------------- ------------------------ BENCHMARKING AND BUSINESS PROCESS TRANSFORMATION Benchmarking | solutionsSM.... Finance/ Information Sales, Marketing and Supply-Chain Administration Management Customer Service Management, Inventory, Accounting/ Process Manufacturing HR Process Transformation | solutionsSM.. Process Redesign, Architecture, Process Redesign, Process Redesign, Migration Planning Network Migration Planning Migration Planning Applications and IT Strategy PACKAGED SOFTWARE IMPLEMENTATION Oracle | solutions............ Financials IT Support Sales and Manufacturing PeopleSoft | solutions........ and of Distribution and Other Applications............ HR Modules Packages Modules Purchasing ADVANCED TECHNOLOGIES INTEGRATION Knowledge | solutionsSM....... EIS and Enterprise Marketing and Product Demand Decision Support Knowledge Merchandising Systems and Management, and Decision Support Forecasting Enterprise Data Warehousing Electronic Web-enhanced Mail/Messaging, Sales Force Automation, Purchasing EDI Commerce | solutionsSM....... Finance and HR Intranets/Extranets Web Marketing, and Process Interactive Kiosk Web-enabled transactions Systems | solutionsSM......... _______________________________ Systems Acquisition ________________________________ Hardware Acquisition Systems Development Network Integration Millennium | solutionsSM...... ______________________________ Year 2000 Integration _______________________________ Application Assessment Renovation Strategy Program Office Test Planning and Execution
CLIENTS AND REPRESENTATIVE SOLUTIONS AnswerThink's clients consist primarily of Fortune 1000 companies and other sophisticated buyers of IT consulting services. During 1997, AnswerThink's ten most significant clients accounted for approximately 39%, and two clients accounted for approximately 13%, of net revenues. Net revenues from the Company's ten largest clients in 1997 ranged from $400,000 to $1.2 million. AnswerThink has served a broad range of clients, including the following: Avon Products, Inc. International Paper Company Bestfoods IVAX Corporation EXAR Corporation Knight Ridder, Inc. Flexible Products Company Lucent Technologies, Inc. Florida Power & Light Company Norrell Corporation Ford Visteon Republic Industries, Inc. General Motors Corporation Starbucks Corporation Hayes Corporation Waste Management, Inc. 25 Three recent examples of the Company's significant engagements include the following: Services Company. A services company retained AnswerThink to assess and define the risks associated with enhancing and upgrading current processes and IT systems in light of the company's strategy to develop additional service offerings. After completion of the initial assessment, an expanded AnswerThink project team was engaged to develop a full strategy and architecture for the client's core PeopleSoft applications. It was critical that the client develop an IT infrastructure capable of supporting the client's planned migration to an expanded business strategy while preserving the functionality of the legacy platforms and systems used to manage its current service offerings. Working closely with the client, the team of professionals from Oracle | solutions, PeopleSoft | solutions, CFO | solutionsSM, Millennium | solutionsSM, Electronic Commerce | solutionsSM and Systems | solutionsSM identified the highest impact business areas, including branch office customer operations, payroll and pricing systems. Subsequently, this multidisciplinary team assisted in the design of a new set of processes and a new technology infrastructure to support these processes. AnswerThink's assessment helped the client view the business, technology risks and opportunities in a new light and AnswerThink advised the client on the architecture design, integration and execution of its new strategy and architecture. The design of the new integrated IT system provided the client with a comprehensive IT solution which the Company believes will result in a more flexible, reliable and robust system as well as service enhancements. Global Consumer Products Company. The Hackett Group was engaged by a global consumer products company to reengineer core finance processes worldwide and to identify opportunities for cost savings. The Hackett Group, through its benchmarking process, discovered that the client's accounting and finance organizations were performing less efficiently than those of comparable companies. Processes examined by the Hackett Group in this engagement included accounts payable, general accounting, cost and inventory accounting, forecasting and reporting. In determining appropriate strategies for improving these processes, the Hackett Group sought input from a wide array of the client's employees in ten countries in which the client operates. To address the client's weaknesses, the Hackett Group formulated a plan to improve the client's accounting and finance organization and implement technology-enabled solutions. The services initially provided by the Hackett Group included assessing the client's processes, determining appropriate objectives, outlining an implementation plan, presenting alternative solutions to the client and building consensus for change. Once these actions were taken, the Hackett Group focused on securing required resources, initiating a series of "quick win" programs, selecting software and determining appropriate controls and detailing specific recommendations for implementing its solutions. Examples of specific recommendations that were implemented include the installation of a purchasing card system, establishing electronic funds and intrabank transfer procedures, and the creation of a North American shared services center. The client has advised the Hackett Group that it expects that all of these actions will result in significant cost savings. High Tech Company. A high tech company decided to expand its product offerings and service capabilities to better respond to customer market demands. The client was experiencing problems with an ongoing enterprise systems implementation project undertaken to achieve these goals and AnswerThink was engaged to address the problems identified. Working closely with the client, a team of AnswerThink professionals from CFO | solutionsSM, CIO | solutionsSM, Oracle | solutions, Systems | solutionsSM and Interprise Supply Chain | solutionsSM performed an analysis of the client's financial, manufacturing, operations, logistics, sales and marketing functions. AnswerThink identified several weaknesses in the client's current systems as well as opportunities for improvement in the current implementation, and concluded that the client's existing applications suite could not adequately support the client's current and future business demands. AnswerThink's engagement was 26 restructured and expanded to span the enterprise. AnswerThink completed a requirements analysis for integrated enterprise applications, created a technical architecture for the enterprise and proposed a solution based on a new suite of Oracle applications to restructure the client's financial and administrative processes. AnswerThink is also assisting the client in restructuring its logistics and supply chain processes through another set of Oracle applications. AnswerThink's solution is intended to significantly shorten cycle times for the manufacturing and distribution of the client's products and to improve the client's invoice, billing and collection process. Implementation of the applications is underway. The client has advised the Company that it expects these new systems to enable it to more effectively manage its entire enterprise by improving manufacturing and billing efficiency and by reducing transaction and administrative costs. SALES AND MARKETING AnswerThink has developed a national sales force that markets the Company's consulting and IT services in major metropolitan areas. The Company's sales organization is supported by its prospect database, which includes companies and decision makers in targeted geographic markets. The extensive relationship base and reputation of the Company's senior management team is also a meaningful source of new business for AnswerThink. AnswerThink sales executives establish contact with targeted prospects to create awareness and preference for the Company. Thereafter, senior level managers are assigned to accounts as client executives to establish and maintain long-term relationships. Client executives are key sources of service advice and overall coordinators of AnswerThink's multiple service offerings to clients. AnswerThink also markets and provides its services directly through its solution teams and national office network. The Company's marketing strategy includes contributing articles to industry publications, expert source placements, speeches, analyst meetings and conferences, the creation of collateral marketing materials and the Company's Internet site (http://www.answerthink.com). This strategy is designed to strengthen the AnswerThink brand name and generate new clients. The program can be expanded and modified to take advantage of market-by-market or service-by-service opportunities as new services or markets are pursued. MANAGEMENT INFORMATION SYSTEMS The Company is currently implementing various aspects of its national service delivery infrastructure. The primary elements include a fully integrated financial and project management system and a proprietary network that is the foundation for AnswerThink's knowledge management system, MindShareSM. The Company believes that MindShareSM will significantly enhance the way clients are served by allowing the Company's knowledge-base to be shared by all of its consultants. MindShareSM is projected to be implemented nationally by the end of March 1998. The financial and project management systems the Company has developed are expected to provide AnswerThink with a fully integrated time and expense reporting system which will serve as the backbone for the Company's engagement management and related client billings, and drives the primary transaction information to the Company's financial reporting systems. The Company has also invested in the development of a comprehensive service delivery model which tracks how clients are handled from initial contact, to risk management assessments, to the delivery of the solution and the corresponding knowledge capture. HUMAN RESOURCES A cornerstone of the Company's strategy is to promote the loyalty and continuity of its consultants by offering packages of base and incentive compensation that it believes are significantly more attractive than those generally offered in the consulting industry. An important element of AnswerThink's compensation program will be Company-wide participation in the Stock Option and Incentive Plan. See "Management--Stock Plan." 27 The Company's success depends in large part upon its ability to attract, develop, motivate and retain highly skilled professionals. Qualified professionals are in great demand and are likely to remain a limited resource for the foreseeable future. In connection with its hiring efforts, the Company has appointed a senior executive to lead AnswerThink's national recruiting team, which is further supported by executive search firms and AnswerThink's internal associate referral program. AnswerThink dedicates significant resources to recruiting consultants with both technology consulting and business experience. Many consultants are selected from among the largest and most successful IT services, consulting, accounting and other professional services organizations. As of March 1, 1998, the Company had 379 employees, 308 of whom were consultants. The Company is also committed to training and developing its professionals. The Company's present training strategy is solution or competency specific and in many cases is done in conjunction with the Company's "best-of-breed" technologies alliance strategy. None of the Company's employees is subject to a collective bargaining arrangement. AnswerThink has entered into nondisclosure and nonsolicitation agreements with virtually all of its personnel. Although all consultants are currently Company employees, the Company does engage consultants as independent contractors from time to time. STRATEGIC ALLIANCES The Company owns the program concept and intellectual property assets of the c.eraSM program, an industry-wide collaboration of companies aimed at providing a more efficient and comprehensive solution to the Year 2000 Issue and other enterprise mass change challenges by offering clients technology solutions, process support technologies and skilled deployment services through a single point of contact. Participants in the c.eraSM program include Peritus, Inc., Software Emancipation, Inc., INTO 2000, Inc., MatriDigm Corporation and Viasoft, Inc. AnswerThink also seeks strategic relationships with business partners to share technical and industry knowledge and pursue joint marketing opportunities. The Company has established business partner relationships with Oracle, PeopleSoft, IBM and Netscape, among others. These relationships typically allow the Company to gain access to training, product support and the technology developed by these partners. The training programs often enable Company employees to become certified in the technologies demanded by AnswerThink's clients. Establishing these relationships allows the Company to use the business partner's name and the "business partner" designation in marketing the Company's services. These relationships also facilitate the Company's pursuit of marketing opportunities with the business partners. These alliances do not require the Company to use technology developed by the business partners in implementing IT solutions for clients. Nonetheless, the Company may be retained by a client based in part upon one or more of the Company's business partner relationships. Although the Company is not obligated to resell products offered by the business partners, in the event it does so, it is sometimes entitled to purchase discounts on products purchased for resale. COMPETITION The market for consulting and IT services includes a large number of competitors and is subject to rapid change. Primary competitors include participants from a variety of market segments, including "Big Six" accounting firms, systems consulting and implementation firms, application software firms, service groups of computer equipment companies, systems integration companies, general management consulting firms and programming companies. Many competitors have significantly greater financial, technical and marketing resources and name recognition than the Company. In addition, the Company competes with its clients' internal resources, particularly where these resources represent a fixed cost to the client. Such competition may impose additional pricing pressures on the Company. See "Risk Factors--Competition." 28 The Company believes that the most significant competitive factors it faces are perceived value, breadth of services offered and price. The Company believes that its multidisciplinary, knowledge-based approach, broad and expanding framework of services and distinctive corporate culture allow it to compete favorably by delivering strategic IT solutions that meet clients' needs in an efficient manner. Other important competitive factors that the Company believes are relevant to its business include technical expertise, knowledge and experience in the industry, quality of service and responsiveness to client needs and speed in delivering IT solutions. INTELLECTUAL PROPERTY RIGHTS AnswerThink's success has resulted, in part, from its methodologies and other proprietary intellectual property rights. The Company relies upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect its proprietary rights and the proprietary rights of third parties from whom the Company licenses intellectual property. The Company enters into confidentiality agreements with its employees and limits distribution of proprietary information. There can be no assurance that the steps taken by the Company in this regard will be adequate to deter misappropriation of proprietary information or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights. See "Risk Factors--Intellectual Property Rights." The Company is in the process of registering the trademarks "ANSWERTHINK" and "ANSWERTHINK CONSULTING GROUP" with the U.S. Patent and Trademark Office. The Company intends to make such other state and federal filings as the Company deems necessary and appropriate to protect its intellectual property rights. PROPERTY AnswerThink's principal executive offices are located at 1001 Brickell Bay Drive, Suite 3000, Miami, Florida 33131. The Company's lease on these premises covers 10,800 square feet and expires March 31, 2003. The Company also leases facilities in Atlanta, Boston, Chicago, Cleveland, Dallas, Iselin (NJ), Miami, New York, Philadelphia and Silicon Valley. AnswerThink anticipates that additional space will be required as its business expands and believes that it will be able to obtain suitable space as needed. LEGAL PROCEEDINGS Certain of the Company's key executives and other management employees resigned from a "Big Six" accounting firm during the first quarter of 1997. The accounting firm initiated litigation in connection with such resignations and the formation of the Company arising out of activities alleged to have constituted a breach of non-competition and non-solicitation obligations. This litigation was settled, and the Company, its key executives, certain other management employees and certain of its stockholders are subject to certain provisions contained in the Settlement Agreement among such persons and the accounting firm. The Settlement Agreement prohibits the Company from soliciting or hiring the accounting firm's employees and soliciting or servicing certain of its clients, and prohibits the accounting firm from soliciting the Company's employees, for a two year period commencing December 31, 1996. Subsequent to the execution of the Settlement Agreement, the accounting firm asserted through legal proceedings that the Company and its executives and employees had conducted activities prohibited by the Settlement Agreement. The Company vigorously denied such assertions, and the accounting firm's claims in these respects were rejected by the court with jurisdiction over the Settlement Agreement. The Company and its executives and management believe that they can operate and grow the Company despite the limitations imposed by the Settlement Agreement. The Company, its key executives and management employees intend to continue to abide by the terms of the Settlement Agreement. See "Risk Factors--Litigation and Settlement." The Company is involved in legal proceedings, claims and litigation arising in the ordinary course of business. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the financial position or results of operations of the Company. 29 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS Set forth below is certain information concerning the directors and executive officers of the Company. The Company's board of directors is divided into three classes serving staggered three-year terms.
TERM AS DIRECTOR NAME AGE POSITION AND OFFICES HELD EXPIRES ---- --- ------------------------- -------- Ted A. Fernandez........ 41 President, Chief Executive Officer and 2001 Chairman Bruce Rauner............ 42 Director 2001 Allan R. Frank.......... 42 Executive Vice President, Chief Technology 2000 Officer and Director William C. Kessinger.... 32 Director 2000 Edmund R. Miller........ 42 Director 1999 Ulysses S. Knotts, III.. 42 Executive Vice President, Sales and 1999 Marketing and Director John F. Brennan......... 40 Executive Vice President, Acquisitions and Strategic Planning and Secretary Luis E. San Miguel...... 38 Executive Vice President, Finance and Chief Financial Officer
Ted A. Fernandez is a founder of the Company and has served as Chief Executive Officer, President and Chairman of its Board of Directors since inception. Mr. Fernandez served as the National Managing Partner of KPMG Peat Marwick LLP's ("KPMG's") Strategic Services Consulting, the firm's transformation and IT consulting group, from May 1994 to January 1997. Mr. Fernandez also served as a member of KPMG's Management Committee from May 1995 to January 1997. From 1979 to 1993, Mr. Fernandez held several industry, executive and client service positions with KPMG. Bruce Rauner has served as a member of the Company's Board of Directors since its inception. Mr. Rauner serves as managing principal of Golder, Thoma, Cressey, Rauner, Inc. ("GTCR"), which manages approximately $1.2 billion in five private equity funds. Prior to joining GTCR, he worked in strategic consulting with Bain and Company and in econometric analysis with Data Resources, Inc. Mr. Rauner is also a director of a number of other companies, including Principal Hospital Company, U.S. Aggregates, Inc., COREStaff, Inc., Polymer Group, Inc., The Coinmach Corporation and Lason, Inc. Allan R. Frank is a founder of the Company and has served as Executive Vice President and Chief Technology Officer and as a member of its Board of Directors since inception. Prior to founding the Company, from May 1994 to January 1997 Mr. Frank served as the Chief Technology Officer for KPMG and as the Partner in Charge of Enabling Technologies with KPMG's Strategic Services Consulting. Mr. Frank also served on KPMG's Board of Directors from September 1994 to January 1997. Prior to 1994, Mr. Frank held several executive and client service responsibilities with KPMG. William C. Kessinger has served as a member of the Board of Directors since inception. Mr. Kessinger joined GTCR in May 1995 and became a Principal in September 1997. Mr. Kessinger was a Principal with The Parthenon Group from July 1994 to May 1995. From August 1992 to June 1994, Mr. Kessinger attended Harvard Business School and received his MBA. Prior to that time, Mr. Kessinger served as an Associate with Prudential Asset Management Asia from August 1988 to June 1992. Mr. Kessinger is also a director of Capitol Office Products, Inc., Excaliber, Inc., Global Imaging Systems, Inc., National Equipment Services, Inc., Users, Inc. and National Computer Print, Inc. Edmund R. Miller is a founder of the Company and has served as a member of the Board of Directors since inception. He is President of Miller Capital Management, Inc. ("Miller Capital"), which he founded in June 30 1996. From 1984 through May 1996, Mr. Miller was employed by Goldman, Sachs & Co., serving since 1988 as a Vice President in Private Client Services in the Miami office. Prior to joining Goldman, Sachs & Co., Mr. Miller spent four years as an International Tax Accountant at Price Waterhouse LLP in New York. Ulysses S. Knotts, III is a founder of the Company and has served as Executive Vice President, Sales & Marketing of the Company and as a member of its Board of Directors since inception. Prior to founding the Company, Mr. Knotts served as the Partner-in-Charge of Sales and Marketing and Enterprise Integration Services from 1995 to January 1997 and as the Partner-in-Charge of Enterprise Package Solutions from 1994 to 1995 with KPMG's Strategic Services Consulting. Prior to joining KPMG, Mr. Knotts was employed by IBM from 1980 to 1993 where he held various executive positions in the consulting and sales and marketing areas. John F. Brennan has served as Executive Vice President, Acquisitions and Strategic Planning, and as Secretary, since August 1997. Mr. Brennan was employed by Ryder System, Inc. ("Ryder"), as Vice President and Treasurer from June 1996 through August 1997. From January 1994 to June 1996, Mr. Brennan served as Assistant Controller of Operations Accounting for Ryder. Mr. Brennan held a variety of accounting and finance positions with Ryder from 1986 through 1994. Prior to joining Ryder, Mr. Brennan was a Manager with Arthur Andersen & Co. Luis E. San Miguel has served as Executive Vice President, Finance and Chief Financial Officer of the Company since inception. From 1994 through April 1997, Mr. San Miguel served as the Chief Financial Officer of KPMG's Strategic Services Consulting. Prior to joining KPMG, Mr. San Miguel spent three years with Burger King Corporation in several positions, the last of which was Director of Operations, Finance and Cash Management. The Company's executive officers are appointed annually by, and serve at the discretion of, the Board of Directors. Each executive officer is a full-time employee of the Company. There are no family relationships between any of the directors or executive officers of the Company. The Board of Directors has appointed a committee consisting of Messrs. Fernandez, Miller and Mr. Rauner or Mr. Kessinger (as chosen by GTCR) to select, by unanimous vote, three independent directors following completion of the Offering. Certain of the Company's major stockholders, including Messrs. Fernandez, Frank, Knotts and Miller and GTCR, currently are parties to a stockholders agreement containing a number of provisions regarding designations and elections for the Board of Directors. Messrs. Fernandez, Frank, Knotts and Miller and GTCR have agreed that these provisions will be suspended upon completion of the Offering. Such suspension will (i) become permanent at such time as three independent directors are appointed to the Board prior to January 1, 1999 or (ii) lapse if such directors are not appointed by such date. See "Certain Transactions." COMMITTEES OF THE BOARD OF DIRECTORS Following completion of the Offering, the Board of Directors will establish a Compensation Committee which will include a majority of non-employee directors. The Compensation Committee will be responsible for determining compensation for the Company's executive officers and administering the Company's stock plans. Prior to April 1998, the Company had no separate compensation committee or other board committee performing equivalent functions with respect to determining compensation for the Company's executives, and those functions were performed by the Company's Board of Directors which included Messrs. Fernandez, Frank and Knotts. Following completion of the Offering, the Board will also establish an Audit Committee comprised of independent directors, which will be responsible for making recommendations concerning the engagement of independent public accountants, reviewing the plans and results of such engagement with the independent public accountants, reviewing the independence of the independent public accountants, considering the range of audit and non-audit fees and reviewing the adequacy of the Company's internal accounting controls. 31 DIRECTOR COMPENSATION Directors who are officers or employees of the Company or any subsidiary of the Company will receive no additional compensation for serving on the Board of Directors or any of its committees. Directors who are not executive officers of the Company will be paid a fee of $ for each board meeting attended in person and all directors will be reimbursed for travel expenses incurred in connection with attending board and committee meetings. Directors are not entitled to additional fees for serving on committees of the Board of Directors. EXECUTIVE COMPENSATION The following table summarizes the compensation paid to or earned by the Company's Chief Executive Officer and all other executive officers of the Company whose salary and bonus for services rendered in all capacities to the Company during the Inception Period exceeded $100,000 (the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
ALL OTHER NAME AND PRINCIPAL POSITION(S) SALARY COMPENSATION - - ------------------------------ -------- ------------ Ted A. Fernandez........................................ $375,000 $295,403(1) President, Chief Executive Officer and Chairman Allan R. Frank ......................................... 375,000 307,185(1) Executive Vice President and Chief Technology Officer Ulysses S. Knotts, III.................................. 375,000 216,185(1) Executive Vice President, Sales and Marketing Luis E. San Miguel...................................... 132,708 -- Executive Vice President, Finance and Chief Financial Officer
- - -------- (1) Represents cash payments made by the Company to each of Messrs. Fernandez, Frank and Knotts relating to obligations assumed by the Company for compensation earned during the Dispute Period. See "Management's Discussion of Financial Condition and Results of Operations--Results of Operations-- Settlement Costs." 32 OPTION GRANTS The following table summarizes the options to acquire Class A Preferred granted to each of the Named Executive Officers during the Inception Period: OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ---------------------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE NUMBER OF PERCENT OF APPRECIATION SECURITIES TOTAL OPTIONS FOR OPTION UNDERLYING GRANTED TO EXERCISE TERM OPTIONS EMPLOYEES OR BASE EXPIRATION ------------- NAME GRANTED IN FISCAL YEAR PRICE DATE 5% 10% - - ---- ---------- -------------- -------- ---------- ------ ------ Ted A. Fernandez........ 50,000(1) 7.1%(2) $3.00 10/23/97 N/A N/A Allan R. Frank.......... 50,000(3) 7.1%(2) $3.00 10/23/97 N/A N/A Ulysses S. Knotts, III.. 50,000(3) 7.1%(2) $3.00 10/23/97 N/A N/A Luis E. San Miguel...... -- N/A N/A N/A N/A N/A
- - -------- (1) Mr. Fernandez exercised options to acquire 33,335 shares of Class A Preferred at the exercise price in July 1997. The remainder of the options lapsed on the expiration date. (2) Represents the number of options granted to each of Messrs. Fernandez, Frank and Knotts to acquire shares of Class A Preferred as a percentage of all options granted to employees to acquire shares of Class A Preferred or shares of Common Stock assuming conversion of all shares of Convertible Preferred Stock. (3) Each of Messrs. Frank and Knotts exercised options to acquire 33,333 shares of Class A Preferred at the exercise price in July 1997. The remainder of the options held by each of Messrs. Frank and Knotts lapsed on the expiration date. YEAR-END OPTION TABLE The following table sets forth certain information as of January 2, 1998 with respect to stock options owned by the Named Executive Officers as of such date and for the Inception Period with respect to stock options exercised by the Named Executive Officers during such period: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END -------------------- -------------------- SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE ---- --------------- -------- -------------------- -------------------- Ted A. Fernandez........ 33,335(1) --(1) 0/0 $0/$0 Allan R. Frank.......... 33,333(2) --(2) 0/0 0/0 Ulysses S. Knotts, III.. 33,333(2) --(2) 0/0 0/0 Luis E. San Miguel...... -- -- 0/0 0/0
- - -------- (1) Mr. Fernandez exercised options to acquire 33,335 shares of Class A Preferred in July 1997 at an exercise price of $3.00 per share which was greater than the estimated current market value per share of Class A Preferred at such time. (2) Each of Messrs. Frank and Knotts exercised options to acquire 33,333 shares of Class A Preferred in July 1997 at an exercise price of $3.00 per share which was greater than the estimated current market value per share of Class A Preferred at such time. 33 EMPLOYMENT AGREEMENTS Effective upon completion of the Offering, each of Messrs. Fernandez, Frank and Knotts (collectively, the "Senior Executives") will enter into an employment agreement with the Company (each, a "Senior Executive Agreement"). Each such Senior Executive Agreement will replace currently existing employment agreements for the Senior Executives. Each of the Senior Executive Agreements will be for a three-year term and provide for an annual salary of $500,000 for the applicable Senior Executive, plus a bonus to be determined and paid pursuant to a bonus plan to be adopted by the Board of Directors for each fiscal year. In the event a Senior Executive is terminated by the Company without cause, that Senior Executive will be entitled to severance payments equaling that Senior Executive's annual salary for a one-year period from the date of termination. The Company will have the option to extend such severance payments for an additional one-year period. In the event the terminated Senior Executive finds new employment, the Company will be able to cease making or reduce the severance payments. Under the terms of the Senior Executive Agreements, each of the Senior Executives will agree to preserve the confidentiality and the proprietary nature of all information relating to the Company and its business. Each Senior Executive also will agree to certain non-competition and non-solicitation provisions. The Senior Executive Agreements also will contain provisions affecting 2,800,000 shares of Common Stock held by each of the Senior Executives which were issued to each of the Senior Executives in connection with the formation of the Company (the "Senior Executive Restricted Stock"). With respect to 1,200,000 shares of Senior Executive Restricted Stock held by each Senior Executive (the "Performance Vesting Stock"), the applicable Senior Executive Agreement will provide that such shares of Senior Executive Restricted Stock will vest in their entirety at such time following completion of the Offering as the average trading price per share of the Company's Common Stock for any consecutive 30-day period exceeds $7.50 (the "Share Price Vesting Date"). Prior to the Share Price Vesting Date, but not later than April 23, 2003, all or a portion of the Performance Vesting Stock held by each Senior Executive will vest upon a sale of all or substantially all of the Company's assets or a change in control of the Company, based, in either case, upon the total return achieved by the Company's initial investors on their initial investment in the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview" and "Risk Factors--Substantial Non-Cash Compensation Expense." Of the remaining 1,600,000 shares of Senior Executive Restricted Stock held by each Senior Executive (the "Time Vesting Stock"), 50% will vest on April 23, 1999, 25% will vest on April 23, 2000 and 25% will vest on April 23, 2001, provided that if the Senior Executive's employment with the Company is terminated by the Company without cause prior to April 23, 2001, then all shares of Time Vesting Stock which have vested up to that date plus one-half of all unvested Time Vesting Stock held by such Senior Executive on such date shall be vested as of the date of such termination. Luis E. San Miguel will enter into an employment agreement with the Company upon completion of the Offering. Mr. San Miguel's employment agreement will have a three-year term and provide for an annual salary of $175,000, plus a bonus pursuant to a bonus plan to be adopted by the Board of Directors for each fiscal year. In the event Mr. San Miguel is terminated by the Company without cause Mr. San Miguel will be entitled to a severance payment at the rate of his annual salary for a six-month period from the date of termination, which may be extended at the option of the Company for an additional six-month period. In the event Mr. San Miguel finds new employment after termination, the Company may eliminate or reduce such severance payments. In addition, the Company's employment agreement with Mr. San Miguel will contain provisions regarding confidentiality, proprietary information and work product, non- competition and non-solicitation. Mr. San Miguel does not own any Senior Executive Restricted Stock. STOCK PLAN The Stock Option and Incentive Plan will permit the Board of Directors, or a committee of the Board of Directors, to grant (i) shares of Common Stock, subject to certain restrictions (the "Restricted Common Stock"), to the Company's employees, directors, officers and other representatives, and (ii) options that are intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to employees of the Company, as well as non-qualifying options to any other individual whose 34 participation in the Stock Option and Incentive Plan is determined to be in the best interests of the Company. The Stock Option and Incentive Plan authorizes the issuance of up to shares of Common Stock as Restricted Common Stock or pursuant to options (subject to anti-dilution adjustments in the event of a stock split, recapitalization or similar transaction). The maximum number of shares or shares subject to options that may be awarded under the Stock Option and Incentive Plan to any one person is shares. The Compensation Committee will determine the number of shares, the purchase price per share and a vesting schedule for any shares of Restricted Common Stock that are to be issued under the Stock Option and Incentive Plan. In the event a holder of Restricted Common Stock ceases to be employed by the Company for any reason, the Stock Option and Incentive Plan provides that the Company may repurchase any shares of unvested Restricted Common Stock held by such holder at such time at a purchase price per share equal to the price paid by such holder upon acquisition of such shares of Restricted Common Stock under the Stock Option and Incentive Plan. The Stock Option and Incentive Plan also will prohibit holders of Restricted Common Stock from certain transfers of their Restricted Common Stock for a four-year period from the date of purchase. The Compensation Committee also will administer grants of options, which will include establishing the exercise price per share under each option and a vesting schedule for any options to purchase shares of Common Stock. The option exercise price per share for incentive stock options granted under the Stock Option and Incentive Plan may not be less than 100% of the fair market value per share of Common Stock on the date of grant of the option (or 110% of the fair market value per share of Common Stock in the case of an incentive stock option granted to an optionee beneficially owning more than 10% of the outstanding Common Stock). The option exercise price for non-incentive stock options granted under the Stock Option and Incentive Plan may not be less than the par value of the Common Stock on the date of grant of the option. The maximum option term is ten years (or five years in the case of an incentive stock option granted to an optionee beneficially owning more than 10% of the outstanding Common Stock). Options may be exercised at any time after grant, except as otherwise provided in the particular option agreement. There is also a $100,000 limit on the value of shares Common Stock (determined at the time of grant) covered by incentive stock options that become exercisable by an optionee in any year. The Board of Directors may amend or terminate the Stock Option and Incentive Plan with respect to shares of Restricted Common Stock or shares of Common Stock as to which options have not been granted. 35 CERTAIN TRANSACTIONS STOCK PURCHASE AGREEMENTS AND RELATED MATTERS Purchase Agreements. The Company and the Initial Investors entered into a stock purchase agreement, dated as of April 23, 1997 (the "Purchase Agreement"), pursuant to which the Company sold 6,800,000 shares of Class A Preferred to Golder, Thoma, Cressey, Rauner Fund V, L.P. ("GTCR V"), MG Capital Partners II, L.P. ("MG"), Gator Associates, Ltd. ("Gator") and Tara Ventures, Ltd. ("Tara" and, together with Gator, the "Miller Group") (GTCR V, MG and the Miller Group are referred to collectively as the "Initial Investors"), for total aggregate consideration of $20,400,000. In July 1997, the Initial Investors converted 3,453,268 shares of Class A Preferred into 3,453,268 shares of Common Stock and subsequently received an additional 10,359,804 shares of Common Stock in respect of such shares in connection with a four-for-one split of Common Stock by the Company on July 17, 1997. The remaining 3,346,732 shares of Class A Preferred issued pursuant to the Purchase Agreement are convertible into 13,386,928 shares of Common Stock. On February 24, 1998, the Company sold an aggregate of 200,000 shares of Class A Preferred to certain of the Initial Investors and their affiliates. GTCR V, Golder, Thoma, Cressey, Rauner Associates V ("GTCR Associates V") and MG received an aggregate of 100,000 shares and Miller Capital received an aggregate of 100,000 shares. These 200,000 shares of Class A Preferred were sold for aggregate consideration of $600,000 and are convertible into 800,000 shares of Common Stock. GTCR is the general partner of GTCR V and a general partner in GTCR Associates V, and Mr. Miller, a director of the Company, is the president and sole stockholder of Miller Capital. Mr. Miller was general partner of Gator and controlled Tara. Prior to August 20, 1997, both Gator and Tara were dissolved, and investors in Gator and Tara received pro rata shares of the Company's capital stock held by each respective entity. The investors in Gator and Tara included Mr. San Miguel, Mr. Miller, individually, two entities controlled by Mr. Miller, six members of Mr. Miller's immediate family, three members of Mr. Fernandez's immediate family and four members of Mr. Frank's immediate family. Bruce Rauner and William C. Kessinger, both directors of the Company, are employees of GTCR which is the general partner of GTCR V. See "Management." In connection with the Purchase Agreement, the Initial Investors, Messrs. Fernandez, Frank, Knotts and Miller and the Company, became parties to a Stockholders Agreement (the "Stockholders Agreement") and a Registration Agreement (the "Investors and Executive Registration Agreement"), and the Senior Executives, Mr. Miller and the Company became party to certain Senior Management Agreements (the "Senior Management Agreements") and certain restricted securities agreements all dated as of April 23, 1997. Messrs. Fernandez, Frank, Knotts, Miller, Brennan and San Miguel, GTCR V, GTCR Associates V, MG and Miller Capital and their affiliates are referred to herein as the "Controlling Stockholders." Stockholders Agreement. Under the Stockholders Agreement, (i) GTCR has the right to designate two members of the Board of Directors, (ii) the Miller Group has the right to designate two members of the Board of Directors, (iii) Messrs. Fernandez, Frank, Knotts and other executives party to the Agreement (the "Senior Managers") have the right to designate three directors, (iv) Mr. Miller and the directors designated by GTCR have the right, with the consultation of the Senior Managers, to designate four independent directors and (v) all parties to Stockholders Agreement agree to vote their shares in favor of any person designated pursuant to the foregoing provisions. Messrs. Fernandez, Frank, Knotts and Miller and GTCR have agreed that these provisions will be suspended temporarily upon completion of the Offering and permanently upon appointment of three additional independent directors by the unanimous vote of a committee of the Board of Directors consisting of Messrs. Fernandez, Miller and Mr. Rauner or Mr. Kessinger (as chosen by GTCR) as long as such new directors are appointed prior to January 1, 1999. See "Management--Directors and Executive Officers." The Stockholders Agreement provides certain employees of the Company, including Messrs. Fernandez, Frank and Knotts, with certain rights of first offer in the event of a proposed sale of the Company. It is expected that this provision of the Stockholders Agreement will be waived for all future transactions. Registration Rights Agreement. Under the terms of the Investors and Executives Registration Agreement the Initial Investors, the Executives and certain other stockholders of the Company will have the right to require the Company to register their shares under the Securities Act. (Shares owned by GTCR V and MG are referred to as the "GTCR Shares," and shares owned by the former shareholders of Gator and Tara are referred to as the 36 "Miller Group Shares.") If the Company proposes to register its securities under the Securities Act, either for its own account or the account of others, these stockholders are entitled to notice of such registration and are entitled to include their shares in such registration; provided, among other conditions, that the underwriters of any offering have the right to limit the number of such shares included in such registration, subject to certain conditions. In addition, the holders of a majority of the GTCR Shares and of a majority of the Miller Group Shares may also require the Company to file under the Securities Act: (i) after the completion of a public offering of the Common Stock, an unlimited number of registrations on Form S-2 or S-3 (provided that the Company is qualified to use such forms) at the Company's expense; (ii) up to two registration statements on Form S-1 at the Company's expense; and (iii) an unlimited number of registration statements on Form S-1 at their own expense. Demand registrations under the Investors and Executives Registration Agreement must be on Form S-2 or S-3 if the Company qualifies to use either of such forms, and the Company has agreed following completion of the Offering to make demand registrations on Form S-3 available. The existence and exercise of the foregoing registration rights may hinder efforts by the Company to arrange future financing for the Company and may have an adverse effect on the market price of the Common Stock. See "Risk Factors--Shares Eligible for Future Sale; Registration Rights Agreements." Other Agreements with Directors and Named Executive Officers. The Senior Management Agreements provided for the sale of an aggregate of 2,100,000 shares of the Company's Common Stock (700,000 each) to Messrs. Fernandez, Frank and Knotts for consideration of $7,000 each, and the sale to Mr. Miller of 300,000 shares of the Company's Common Stock for consideration of $3,000. Such shares were purchased by the Senior Executives and Mr. Miller on April 23, 1997. The Senior Executives and Mr. Miller subsequently received an additional 7,200,000 shares of Common Stock in respect of such shares in connection with the four-for-one split of Common Stock by the Company on July 17, 1997. The Senior Management Agreements and the Restricted Securities Agreements provide the terms on which such shares vest and place certain restrictions on such shares. In addition, under the terms of their Senior Management Agreements, the Senior Executives and Mr. Miller have preemptive rights with respect to certain proposed sales of shares of Common Stock by the Company. The respective Senior Management Agreements for each of Messrs. Fernandez, Frank and Knotts provide for a salary at the rate of $500,000 per year, plus bonuses. Mr. Miller's Senior Management Agreement does not provide for a salary to be paid to Mr. Miller. The Company expects that the Senior Management Agreement with Mr. Miller will be terminated prior to the Offering. The Senior Management Agreements and the Restricted Securities Agreements with Messrs. Fernandez, Frank and Knotts will be terminated and replaced by Senior Executive Agreements upon completion of the Offering. See "Management-- Employment Agreements." On July 22, 1997, Mr. San Miguel entered into an employment agreement and a restricted stock agreement with the Company. Under these agreements, Mr. San Miguel has a salary of $175,000 per year, and he purchased 320,000 shares of Common Stock for consideration of $800. These shares will vest over six years and are subject to certain restrictions on transfer. These agreements with Mr. San Miguel will be terminated and replaced by an employment agreement between the Company and Mr. San Miguel upon completion of the Offering. See "Management--Employment Agreements." Pursuant to options in the Senior Management Agreements, on July 10, 1997 the Company sold an aggregate of 100,001 shares of Class A Preferred to Messrs. Fernandez, Frank and Knotts for $3.00 per share. Of these 100,001 shares, 33,335 shares were sold to Mr. Fernandez, and 33,333 shares were sold to each of Messrs. Knotts and Frank. All of these shares were converted into common stock, and the Senior Executives subsequently received an additional 300,003 shares of Common Stock in respect of such shares in connection with the four-for-one split of Common Stock by the Company on July 17, 1997. See "Management--Executive Compensation." Pursuant to the Purchase Agreement, the Senior Management Agreement and certain other agreements with executives of the Company, the Initial Investors and certain of the Company's executives have preemptive rights with respect to certain proposed sales of Common Stock by the Company, not including any sale in the Offering 37 or any sales to employees of the Company pursuant to employment agreements or benefit plans. In addition, these same parties were granted certain rights of first refusal and participation rights with respect to any sales of Common Stock by the other parties to these agreements. The Company expects that the holders of these preemptive rights, rights of first refusal and participation rights will have waived those rights effective upon the Offering for all issuances and transfers thereafter. The Company intends to enter into a sublease with Miller Capital whereby the Company would lease to Miller Capital a portion of the premises at 1001 Brickell Bay Drive, Suite 3000, Miami, Florida. The Company and Miller Capital have reached agreement on the principal terms of this sublease, and the Company believes that the financial terms of this sublease will be comparable to those that would be obtained in an arms-length transaction. NETSOL INTERNATIONAL, INC. The Company is a party to an Alliance Agreement, dated as of December 10, 1997 (the "Alliance Agreement"), by and among the Company and NetSol International, Inc., a Florida corporation ("NetSol"). Pursuant to the Alliance Agreement, the Company will receive referrals and leads on consulting, systems integration and other projects from NetSol in both the U.S. and Latin American markets. NetSol will serve as a sales agent for the Company on projects in Latin America, and the Company will have the right of first refusal on systems integration and network integration projects in Latin America when NetSol requires subcontracting to a third party in the U.S. market. The Alliance Agreement also provides for the sharing of commissions on hardware and software procurement, applications software and consulting services. The authorized capital stock of NetSol consists of 10,000 shares of common stock, of which 6,624 are issued and outstanding. Pursuant to a stock purchase agreement, dated as of August 29, 1997 (the "NetSol Stock Purchase Agreement"), GTCR V purchased 2,206 shares of NetSol for aggregate consideration of $662,500 from NetSol's stockholders, which include Messrs. Fernandez, Frank, Knotts and Miller. Subsequent to the NetSol Stock Purchase Agreement, and assuming the exercise of options granted to certain members of NetSol's management, GTCR V will own 33.33%, and Messrs. Fernandez, Frank, Knotts and Miller will own 12.59%, 5.03%, 5.03% and 2.52% of NetSol's common stock, respectively. NetSol has provided and is expected to continue to provide the Company with such products as computer hardware and telephone systems and related procurement services. For the Inception Period, payments to NetSol for such goods and services totaled approximately $1.5 million. The Company believes that the terms on which such goods and services were acquired are comparable to those that would be obtained from a third-party vendor in arms-length transactions. 38 PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth certain information regarding the beneficial ownership of Common Stock as of March 13, 1998, assuming the Conversion and as adjusted to reflect the sale of shares of Common Stock in this Offering: (i) by each person (or group of affiliated persons) known by the Company to be the beneficial owner of more than 5% of the outstanding Common Stock; (ii) by each of the Named Executive Officers; (iii) by each director of the Company; (iv) by all of the Company's directors and executive officers as a group; and (v) each stockholder selling shares in the Offering, (each a "Selling Stockholder").
SHARES BENEFICIALLY SHARED BENEFICIALLY OWNED OWNED PRIOR TO OFFERING (1) NUMBER OF AFTER OFFERING (1) -------------------------SHARES BEING ---------------------- NAME NUMBER PERCENT OFFERED NUMBER PERCENT ---- ------------- ----------------------- --------- ---------- Ted A. Fernandez (2).... 2,933,340 4.8% Allan R. Frank (2), (3).................... 3,069,332 5.0 Ulysses S. Knotts, III (2).................... 2,933,332 4.8 Luis E. San Miguel (2).. 365,332 * Bruce Rauner (4), (5)... 13,466,665 22.0 William C. Kessinger (4), (5)............... 13,466,665 22.0 Golder, Thoma, Cressey, Rauner Fund V, LP (4), (5).................... 13,443,180 22.0 Golder, Thoma, Cressey, Rauner Associates V (4), (5)............... 23,485 * Edmund R. Miller (2), (6).................... 14,928,000 24.4 Miller Capital Management, Inc. (2), (6).................... 2,213,336 3.6 Southeast Investments International, Ltd. (2), (6)............... 453,336 * Southeast Investments, L.P. (2), (6).......... 1,360,000 2.2 All directors and executive officers as a group (8 persons)...... 37,696,001 61.7 OTHER SELLING STOCKHOLDERS - - -------------
- - -------- * Less than 1%. (1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person has beneficial ownership of any securities as to which such person, directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power and as to which such person has the right to acquire such voting and/or investment power within 60 days. Percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person by the sum of the number of shares outstanding as of such date and the number of shares as to which such person has the right to acquire voting and/or investment power within 60 days. (2) The address of each of Messrs. Fernandez, Frank, Knotts, San Miguel and Miller and Miller Capital Management, Inc., Southeast Investments International, Ltd. and Southeast Investments, LP is 1001 Brickell Bay Drive, Suite 3000, Miami, Florida 33131. (3) Includes 136,000 shares of Common Stock with respect to which Mr. Frank has voting power pursuant to proxies granted by the beneficial owners of such shares. Mr. Frank disclaims beneficial ownership of these shares. (4) The address of each of Messrs. Rauner and Kessinger, GTCR V and GTCR Associates V is 6100 Sears Tower, Chicago, Illinois, 60606. 39 (5) Includes 13,443,180 shares held by GTCR V and 23,485 shares held by GTCR Associates V. Messrs. Rauner and Kessinger are principals in GTCR which is the general partner of GTCR V and a general partner in GTCR Associates V. Messrs. Rauner and Kessinger disclaim the beneficial ownership of the shares held by such entities except to the extent of his proportionate ownership interests therein. (6) Includes 2,560,000 shares held by Mr. Miller individually. Also includes (i) 400,000 shares held directly by Miller Capital, which is wholly owned by Mr. Miller, (ii) 453,336 shares held directly by Southeast Investments International, Ltd., which is an investment fund managed by Miller Capital, (iii) 1,360,000 shares held directly by Southeast Investments, L.P., which is an investment fund managed by Miller Capital and in which Mr. Miller owns, indirectly, approximately a 39% interest, and (iv) 10,154,664 shares with respect to which Mr. Miller has voting power pursuant to proxies granted by the beneficial owners of such shares. Mr. Miller disclaims the beneficial ownership of the shares owned by Southeast Investments International, Ltd. and Southeast Investments, L.P. except to the extent of his proportionate interest therein, and Mr. Miller disclaims beneficial ownership of all shares with respect to which he has voting power pursuant to a proxy granted by the beneficial owner thereof. DESCRIPTION OF CAPITAL STOCK The Company was incorporated as a Florida corporation on April 23, 1997. As of January 2, 1998, the Florida corporation had 46,757,184 shares of common stock, $.001 par value per share, outstanding and 256 holders of record of such common stock and 3,346,732 shares of Convertible Preferred Stock outstanding and 47 holders of record of such Convertible Preferred Stock. Immediately prior to the effective date of the Offering, the Company will be reincorporated as a Delaware corporation. The Reincorporation will be effected pursuant to a plan of merger in which one share of the Common Stock of the Delaware corporation will be exchanged for shares of common stock of the Florida corporation. Immediately prior to the consummation of the merger, each share of the outstanding Convertible Preferred Stock will be converted into four shares of common stock of the Florida corporation. The following is a description of the material terms of the capital stock of the Delaware corporation. COMMON STOCK The Company is authorized to issue 125,000,000 shares of Common Stock, $.01 par value per share. Upon completion of the Offering, each stockholder of record will be entitled to one vote for each outstanding share of Common Stock owned by such stockholder on every matter properly submitted to the stockholders for their vote. Subject to the dividend rights of holders of the Company's preferred stock, par value $.01 per share ("Preferred Stock"), holders of Common Stock are entitled to any dividend declared by the Board of Directors out of funds legally available for such purpose, and, after the payment of liquidation preferences to all holders of Preferred Stock, holders of Common Stock are entitled to receive on a pro rata basis all remaining assets of the Company available for distribution to the stockholders in the event of the liquidation, dissolution, or winding up of the Company. Holders of Common Stock do not have any preemptive right to become subscribers or purchasers of additional shares of any class of the Company's capital stock. PREFERRED STOCK The Company's Certificate of Incorporation allows the Company to issue without stockholder approval Preferred Stock having rights senior to those of the Common Stock. As of the closing of the Offering, no shares of Preferred Stock will be outstanding. Thereafter, the Board of Directors will be authorized, without further stockholder approval, to issue up to 1,250,000 shares of Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, and to fix the number of shares constituting any series and the designations of such series. 40 The issuance of Preferred Stock may have the effect of delaying or preventing a change in control of the Company. The issuance of Preferred Stock could decrease the amount of earnings and assets available for distribution to the holders of Common Stock or could adversely affect the rights and powers, including voting rights, of the holders of the Common Stock. In certain circumstances, such issuance could have the effect of decreasing the market price of the Common Stock. The Company currently has no plans to issue any shares of Preferred Stock. LIMITATION OF LIABILITY As permitted by the General Corporation Law of the State of Delaware (the "DGCL"), the Company's Certificate of Incorporation provides that directors of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, relating to unlawful payment of dividends or unlawful stock purchase or redemption of stock or (iv) for any transaction from which the director derives an improper personal benefit. As a result of this provision, the Company and its stockholders may be unable to obtain monetary damages from a director for breach of his or her duty of care. The Bylaws of the Company provide for the indemnification of the Company's directors and officers and any person who is or was serving at the request of the Company as a director, officer, employee, partner (limited or general) or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, including service with respect to an employee benefit plan to the fullest extent authorized by, and subject to the conditions set forth in the DGCL against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA taxes or penalties and amounts paid or to be paid in settlement) , except that the Company will indemnify a director or officer in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Company's Board of Directors. The indemnification provided under the Bylaws includes the right to be paid by the Company the expenses (including attorneys' fees) in advance of any proceeding for which indemnification may be had in advance of its final disposition, provided that the payment of such expenses (including attorneys' fees) incurred by a director or officer in advance of the final disposition of a proceeding may be made only upon delivery to the Company of an undertaking by or on behalf of such director or officer to repay all amounts so paid in advance if it is ultimately determined that such director or officer is not entitled to be indemnified. Pursuant to the Bylaws, if a claim for indemnification is not paid by the Company within 60 days after a written claim has been received by the Company, the claimant may at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant will be entitled to be paid also the expense of prosecuting such action. Under the Bylaws, the Company has the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee, partner (limited or general) or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, against any liability asserted against such person or incurred by such person in any such capacity, or arising out of such person's status as such, and related expenses, whether or not the Company would have the power to indemnify such person against such liability under the provisions of the DGCL. The Company maintains director and officer liability insurance on behalf of its directors and officers. CERTAIN ANTI-TAKEOVER EFFECTS The Company's Certificate of Incorporation and Bylaws contain certain provisions that are intended to enhance the likelihood of continuity and stability in the composition of the Company's Board of Directors and in the policies formulated by the Board of Directors. In addition certain provisions of Delaware law may hinder or delay an attempted takeover of the Company other than through negotiation with the Board of Directors. These 41 provisions could have the effect of discouraging certain attempts to acquire the Company or remove incumbent management even if some or a majority of the Company's stockholders were to deem such an attempt to be in their best interest, including attempts that might result in the stockholders' receiving a premium over the market price for the shares of Common Stock held by stockholders. Classified Board of Directors; Removal; Vacancies. The Certificate of Incorporation provides that the Board of Directors is divided into three classes of directors serving staggered three-year terms. The classification of directors has the effect of making it more difficult for stockholders to change the composition of the Board of Directors in a relatively short period of time. The Certificate of Incorporation further provides that directors may be removed only for cause and then only by the affirmative vote of the holders of at least two-thirds of the entire voting power of all the then-outstanding shares of stock of the Company entitled to vote generally in the election of directors, voting together as a single class. In addition, vacancies and newly created directorships resulting from any increase in the size of the Board of Directors may be filled only by the affirmative vote of a majority of the directors then in office (even if such directors do not constitute a quorum) or by a sole remaining director. The foregoing provisions could prevent stockholders from removing incumbent directors without cause and filling the resulting vacancies with their own nominees. Advance Notice Provisions for Stockholder Proposals and Stockholder Nominations of Directors. The Bylaws establish an advance notice procedure with regard to the nomination, other than by the Board of Directors, of candidates for election to the Board of Directors and with regard to certain matters to be brought before an annual meeting of stockholders of the Company. For nominations and other business to be brought properly before an annual meeting by a stockholder, the stockholder must deliver notice to the Company not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting. Separate provisions based on public notice by the Company specify how this advance notice requirement operates in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date. The stockholder's notice must set forth certain specified information regarding the stockholder and its holdings, as well as certain background information regarding any director nominee (together with such person's written consent to being named as a nominee and to serving as a director if elected) and a brief description of any business desired to be brought before the meeting, the reasons for conducting the business at the meeting and any material interest of the stockholder in the business proposed. In the case of a special meeting of stockholders called for the purpose of electing directors, nominations by a stockholder may be made only by delivery of notice to the Company no later than the tenth day following the day on which public announcement of the special meeting is made. Although the Bylaws do not give the Company's Board of Directors any power to approve or disapprove stockholder nominations for the election of directors or any other business desired by stockholders to be conducted at an annual meeting, the Bylaws (i) may have the effect of precluding a nomination for the election of directors or precluding the conduct of certain business at a particular meeting if the proper procedures are not followed or (ii) may discourage or deter a third party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company, even if the conduct of such solicitation or such attempt might be beneficial to the Company and its stockholders. Special Stockholders' Meetings. Under the Certificate of Incorporation and the Bylaws, special meetings of the stockholders, unless otherwise prescribed by statute, may be called only (i) by the Board of Directors or by the Chairman or President of the Company or (ii) by stockholders of the Company upon the written request of the holders of at least 80% of the securities of the Company outstanding and entitled to vote generally in the election of directors. Limitations on Stockholder Action by Written Consent. The Certificate of Incorporation also provides that any action required or permitted to be taken at a stockholders' meeting may be taken without a meeting, without prior notice and without a vote, if the action is taken by persons who would be entitled to vote at a meeting and who hold shares having voting power equal to not less than the lesser of (a) 80% of the voting power of all shares of each class or series entitled to vote on such action or (b) the minimum number of votes of each class or series that would be necessary to authorize or take the action at a meeting at which all shares of each class or series entitled to vote were present and voted. 42 Section 203 of Delaware Law. In addition to the foregoing provisions of the Certificate of Incorporation and the Bylaws, the Company will be subject to the provisions of Section 203 of the DGCL. Section 203 prohibits publicly held Delaware corporations from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A "business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation's voting stock. These provisions could have the effect of delaying, deferring or preventing a change in control of the Company or reducing the price that certain investors might be willing to pay in the future for shares of the Common Stock. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Company's Common Stock is BankBoston, N.A. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offering, the Company will have shares of Common Stock outstanding (assuming no exercise of outstanding options). Of these shares, the Shares ( Shares if the Underwriters' over-allotment option is exercised in full) to be sold in the Offering will be freely tradable without restriction or further registration under the Securities Act, except that any shares purchased by affiliates of the Company, as that term is defined in Rule 144 under the Securities Act ("Affiliates"), may generally only be sold in compliance with the limitations of Rule 144 described below. The remaining shares of Common Stock outstanding upon completion of the Offering are deemed "Restricted Shares" under Rule 144. SALES OF RESTRICTED SHARES Of the total Restricted Shares, 8,400,000 are owned by the Senior Executives and are subject to certain vesting requirements and restrictions on transfer as set forth in the Senior Executives Agreements. See "Management--Employment Agreements." The Company issued 600,000 Restricted Shares to Mr. Miller, which shares are subject to the same restrictions on vesting as the Performance Vesting Stock owned by the three Senior Executives. An additional 10,406,000 Restricted Shares were issued to 19 employees of the Company in connection with employment agreements entered into by the Company with such employees, and such shares are subject to certain vesting and requirements restrictions on transfer which are substantially similar to the requirements and restrictions on the Senior Executive Restricted Stock. As of February 16, 1998, the Company had issued 10,781,012 Restricted Shares which will be subject to the terms and conditions of the Stock Option and Incentive Plan. See "Management--Stock Plan." None of the Restricted Shares will be eligible for sale in the public market on the date of this Prospectus. Following the period ending 180 days after the date of this Prospectus, an additional shares of Common Stock will be eligible for sale in the public market subject to Rule 144 under the Securities Act. See "--Lock-up Agreements." In general, under Rule 144, a person (or persons whose shares are aggregated), including an Affiliate, who has beneficially owned Restricted Shares for at least one year is entitled to sell, within any three-month period, a number of such shares that does not exceed the greater of (i) one percent of the then outstanding shares of Common Stock (approximately shares immediately after this offering) or (ii) the average weekly trading volume in the Common Stock on the Nasdaq National Market during the four calendar weeks preceding the date on which notice of such sale is filed, provided certain requirements concerning availability of public information, manner of sale and notice of sale are satisfied. In addition, Affiliates must comply with the restrictions and requirements of Rule 144, other than the one- year holding period requirement, in order to sell shares of Common Stock which are not restricted securities. Under Rule 144(k), a person who is not an affiliate and has not been an 43 Affiliate for at least three months prior to the sale and who has beneficially owned Restricted Shares for at least two years may resell such shares without compliance with the foregoing requirements. In meeting the one and two years holding periods described above, a holder of Restricted Shares can include the holding periods of a prior owner who was not an Affiliate. The one and two year holding periods described above do not begin to run until the full purchase price or other consideration is paid by the person acquiring the Restricted Shares from the issuer or an Affiliate. OPTIONS At February 16, 1998, 2,119,722 shares of Common Stock were issuable pursuant to outstanding options. None of these options are currently exercisable, and none will be exercisable, prior to May 27, 1999. Following the Offering, the Company intends to file one or more registration statements on Form S-8 under the Securities Act to register up to shares of Common Stock issued as subject to outstanding stock options or reserved for issuance under the Company's Stock Option and Incentive Plan. LOCK-UP AGREEMENTS Each of the Company, the Selling Stockholders, the directors, executive officers and other stockholders of the Company have agreed that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, as defined, it will not, during the period ending 180 days after the date of this Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership or the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The restrictions described in this paragraph do not apply to (x) the sale of Shares to the Underwriters, (y) the issuance by the Company of shares of Common Stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this Prospectus of which the Underwriters have been advised in writing or (z) transactions by any person other than the Company relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Offering. REGISTRATION RIGHTS Following the Offering, holders of shares of Common Stock will have the right to require the Company to register such shares under the Securities Act pursuant to terms and conditions of registration agreements with the Company. See "Certain Transactions." The existence and exercise of the foregoing registration rights may hinder efforts by the Company to arrange the financing for the Company and may have an adverse effect on the market price of the Common Stock. See "Risk Factors--Shares Eligible for Future Sales; Registration Rights Agreements." 44 UNDERWRITERS Under the terms and subject to the conditions contained in an Underwriting Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters named below for whom Morgan Stanley & Co. Incorporated is acting as Representative, have severally agreed to purchase, and the Company and the Selling Stockholders have agreed to sell to them, severally, the respective number of Shares of Common Stock set forth opposite the names of such Underwriters below.
NUMBER OF UNDERWRITER SHARES ----------- --------- Morgan Stanley & Co. Incorporated..................................... Donaldson, Lufkin & Jenrette Securities Corporation................... NationsBanc Montgomery Securities LLC................................. The Robinson-Humphrey Company, LLC.................................... ---- Total............................................................... ====
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the shares of Common Stock offered hereby are subject to the approval of certain legal matters by their counsel and to certain other conditions. The Underwriters are obligated to take and pay for all of the Shares of Common Stock offered hereby (other than those covered by the over-allotment option described below) if any such Shares are taken. The Underwriters initially propose to offer part of the Shares of Common Stock directly to the public at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of $ a Share under the public offering price. Any Underwriter may allow, and such dealers may reallow, a concession not in excess of $ a Share to other Underwriters or to certain dealers. After the initial offering of the Shares of Common Stock, the offering price and other selling terms may from time to time be varied by the Representative. The Company and certain Selling Stockholders have granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus, to purchase up to an aggregate of additional Shares of Common Stock at the public offering price set forth on the cover page hereof, less underwriting discounts and commissions. The Underwriters may exercise such option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the Shares of Common Stock offered hereby. To the extent such option is exercised, each Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional Shares of Common Stock as the number set forth next to such Underwriter's name in the preceding table bears to the total number of Shares of Common Stock set forth next to the names of all Underwriters in the preceding table. The Underwriters have informed the Company that they do not intend sales to discretionary accounts to exceed five percent of the total number of Shares of Common Stock offered by them. From time to time, the Underwriters have provided, and may continue to provide, investment banking services to the Company. The Company and the Selling Stockholders have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act. Application will be made for quotation of the Common Stock on the Nasdaq National Market under the symbol "ANSR." Each of the Company, the Selling Stockholders, the directors, executive officers and other stockholders of the Company have agreed that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period ending 180 days after the date of this Prospectus, (i) offer, pledge, 45 sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership or the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The restrictions described in this paragraph do not apply to (x) the sale of Shares to the Underwriters, (y) the issuance by the Company of shares of Common Stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this Prospectus of which the Underwriters have been advised in writing or (z) transactions by any person other than the Company relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Offering. In order to facilitate the Offering of the Common Stock, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Specifically, the Underwriters may overallot in connection with the Offering, creating a short position in the Common Stock for their own account. In addition, to cover overallotments or to stabilize the price of the Common Stock, the Underwriters may bid for, and purchase, shares of Common Stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an Underwriter or a dealer for distributing the Common Stock in the Offering, if the syndicate repurchases previously distributed Common Stock in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the Common Stock above independent market levels. The Underwriters are not required to engage in these activities and may end any of these activities at any time. Prior to the Offering, there has been no public market for the Common Stock. The initial public offering price will be determined by negotiations between the Company and the Underwriters. Among the factors to be considered in determining the initial public offering price will be the future prospects of the Company and its industry in general, sales, earnings and certain other financial and operating information of the Company in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to those of the Company. The estimated initial public offering price range set forth on the cover page of this Preliminary Prospectus is subject to change as a result of market conditions and other factors. At the request of the Company, the Underwriters have reserved for sale, at the initial offering price, up to Shares offered hereby for directors, officers, employees, business associates, and related persons of the Company. The number of Shares of Common Stock available for sale to the general public will be reduced to the extent such persons purchase such reserved Shares. Any reserved Shares which are not so purchased will be offered by the Underwriters to the general public on the same basis as the other Shares offered hereby. 46 LEGAL MATTERS The validity of the Shares of Common Stock offered hereby will be passed upon for the Company by Hogan & Hartson L.L.P., Washington, D.C. Certain legal matters in connection with the Offering will be passed upon for the Underwriters by Ropes & Gray, Boston, Massachusetts. EXPERTS The financial statements of AnswerThink Consulting Group, Inc., Delphi Partners, Inc., The Hackett Group, Inc. and Relational Technologies, Inc. included elsewhere in this Prospectus have been included herein in reliance on the reports of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act, of which this Prospectus is a part, with respect to the Common Stock offered hereby. This Prospectus omits certain information contained in the Registration Statement, and reference is made to the Registration Statement for further information with respect to the Company and the Common Stock offered hereby. Statements contained herein concerning the provisions of documents are necessarily summaries of such documents and when any such document is an exhibit to the Registration Statement, each such statement is qualified in its entirety by reference to the copy of such document filed with the Commission. The Registration Statement, including the exhibits and schedules thereto, may be inspected without charge at the principal office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional Offices at 75 Park Place, Room 1288, New York, New York 10017, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511, and copies may be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Registration Statement, including all exhibits and schedules, and such reports and other information may also be accessed electronically by means of the Commission's site on the World Wide Web, at http://www.sec.gov. 47 INDEX TO FINANCIAL STATEMENTS
PAGE ---- FINANCIAL STATEMENTS OF ANSWERTHINK CONSULTING GROUP, INC. Report of Independent Certified Public Accountants...................... F-2 Consolidated Balance Sheet as of January 2, 1998........................ F-3 Consolidated Statement of Operations for the Period April 23, 1997 (date of inception) through January 2, 1998.................................. F-4 Consolidated Statement of Stockholders' Equity for the Period April 23, 1997 (date of inception) through January 2, 1998....................... F-5 Consolidated Statement of Cash Flows for the Period April 23, 1997 (date of inception) through January 2, 1998.................................. F-6 Notes to Financial Statements........................................... F-7 FINANCIAL STATEMENTS OF DELPHI PARTNERS, INC. Report of Independent Accountants....................................... F-15 Balance Sheets as of October 24, 1997 and December 31, 1996............. F-16 Statements of Operations for the Period January 1, 1997 through October 24, 1997 and for the Years Ended December 31, 1995 and 1996............ F-17 Statements of Stockholders' Equity for the Period from January 1, 1997 through October 24, 1997 and for the Years Ended December 31, 1995 and 1996................................................................... F-18 Statements of Cash Flows for the period January 1, 1997 through October 24, 1997 and for the Years ended December 31, 1996 and 1995............ F-19 Notes to Financial Statements........................................... F-20 FINANCIAL STATEMENTS OF THE HACKETT GROUP, INC. Report of Independent Accountants....................................... F-23 Balance Sheets as of September 30, 1997 and December 31, 1996........... F-24 Statements of Operations for the Period January 1, 1997 through September 30, 1997 and for the Years Ended December 31, 1996 and 1995.. F-25 Statements of Stockholder's Equity for the Period January 1, 1997 through September 30, 1997 and for the Years Ended December 31, 1996 and 1995............................................................... F-26 Statements of Cash Flows for the Period January 1, 1997 through September 30, 1997 and for the Years Ended December 31, 1996 and 1995.. F-27 Notes to Financial Statements........................................... F-28 FINANCIAL STATEMENTS OF RELATIONAL TECHNOLOGIES, INC. Report of Independent Accountants....................................... F-31 Balance Sheets as of July 31, 1997 and December 31, 1996................ F-32 Statements of Operations for the Period January 1, 1997 through July 31, 1997 and for the Year Ended December 31, 1996.......................... F-33 Statements of Stockholders' Equity for the Period January 1, 1997 through July 31, 1997 and for the Year Ended December 31, 1996......... F-34 Statements of Cash Flows for the Period January 1, 1997 through July 31, 1997 and for the Year Ended December 31, 1996.......................... F-35 Notes to Financial Statements........................................... F-36 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION Basis of Presentation................................................... PF-1 Unaudited Pro Forma Consolidated Statement of Operations for the Period April 23, 1997 (date of inception) through January 2, 1998............. PF-2 Notes to Unaudited Pro Forma Consolidated Statement of Operations....... PF-3
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of AnswerThink Consulting Group, Inc. Miami, Florida We have audited the accompanying consolidated balance sheet of AnswerThink Consulting Group, Inc. and subsidiaries as of January 2, 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows for the period April 23, 1997 (date of inception) through January 2, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AnswerThink Consulting Group, Inc. and subsidiaries as of January 2, 1998 and the consolidated results of their operations and their cash flows for the period April 23, 1997 (date of inception) through January 2, 1998, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Miami, Florida March 12, 1998 F-2 ANSWERTHINK CONSULTING GROUP, INC. CONSOLIDATED BALANCE SHEET ASSETS
AS OF JANUARY 2, 1998 --------------- Current assets: Cash and cash equivalents.................................... $ 3,173,262 Accounts receivable and unbilled revenue, net................ 10,157,720 Prepaid expenses and other current assets.................... 412,388 ----------- Total current assets....................................... 13,743,370 Property and equipment, net.................................... 2,495,295 Other assets................................................... 467,370 Goodwill, net.................................................. 11,943,610 ----------- Total assets............................................... $28,649,645 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................................. $ 1,437,292 Accrued expenses and other liabilities....................... 4,126,254 ----------- Total current liabilities.................................. 5,563,546 ----------- Borrowings under revolving credit facility .................... 8,150,000 Notes payable to stockholders.................................. 4,050,000 ----------- Total long-term liabilities................................ 12,200,000 ----------- Total liabilities.......................................... 17,763,546 ----------- Commitments and contingencies Convertible preferred stock ................................... 10,040,196 ----------- Stockholders' equity: Common stock, $.001 par value, authorized 100,000,000 shares; issued and outstanding 46,757,184 shares.................... 46,757 Additional paid-in capital................................... 13,545,901 Unearned compensation--restricted stock...................... (656,303) Accumulated deficit.......................................... (12,090,452) ----------- Total stockholders' equity................................. 845,903 ----------- Total liabilities and stockholders' equity................. $28,649,645 ===========
The accompanying notes are an integral part of the consolidated financial statements. F-3 ANSWERTHINK CONSULTING GROUP, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD APRIL 23, 1997 (DATE OF INCEPTION) THROUGH JANUARY 2, 1998 Net revenues..................................................... $ 14,848,172 Costs and expenses: Project personnel and expenses................................. 13,333,921 Selling, general and administrative............................ 8,084,558 Settlement costs............................................... 1,902,608 ------------ Total costs and operating expenses........................... 23,321,087 ------------ Loss from operations........................................... (8,472,915) Other income (expense): In-process research and development technology................. (4,000,000) Interest income................................................ 498,018 Interest expense............................................... (115,555) ------------ Net loss......................................................... $(12,090,452) ============ Net loss per common share--basic and diluted..................... $ (0.95) ============ Weighted average common shares outstanding....................... 12,684,637
The accompanying notes are an integral part of the consolidated financial statements. F-4 ANSWERTHINK CONSULTING GROUP, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD APRIL 23, 1997 (DATE OF INCEPTION) THROUGH JANUARY 2, 1998
UNEARNED COMMON STOCK ADDITIONAL COMPENSATION TOTAL ------------------ PAID-IN RESTRICTED ACCUMULATED STOCKHOLDERS' SHARES AMOUNT CAPITAL STOCK DEFICIT EQUITY ---------- ------- ----------- ------------ ------------ ------------- Balance, April 23, 1997................... -- $ -- $ -- $ -- $ -- $ -- Issuance of 27,469,700 shares of restricted common stock........... 27,469,700 27,470 744,144 (702,447) -- 69,167 Conversion of 3,653,268 shares of Class A preferred stock to common stock .......... 14,613,072 14,613 10,945,191 -- -- 10,959,804 Issuance of 4,674,412 shares of restricted common stock for business acquisitions.. 4,674,412 4,674 1,856,566 -- -- 1,861,240 Amortization of deferred compensation expense... -- -- -- 46,144 -- 46,144 Net loss................ -- -- -- -- (12,090,452) (12,090,452) ---------- ------- ----------- --------- ------------ ------------ Balance, January 2, 1998................... 46,757,184 $46,757 $13,545,901 $(656,303) $(12,090,452) $ 845,903 ========== ======= =========== ========= ============ ============
The accompanying notes are an integral part of the consolidated financial statements. F-5 ANSWERTHINK CONSULTING GROUP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD APRIL 23, 1997 (DATE OF INCEPTION) THROUGH JANUARY 2, 1998 Cash flows from operating activities: Net loss....................................................... $(12,090,452) Adjustments to reconcile net loss to net cash used in operating activities: In-process research and development technology............... 4,000,000 Depreciation and amortization................................ 462,073 Changes in assets and liabilities, net of effects from acquisitions: Increase in accounts receivable and unbilled revenue........... (4,481,152) Increase in prepaid expenses and other current and non-current assets........................................................ (736,166) Increase in accounts payable................................... 825,545 Increase in accrued expenses and other liabilities............. 784,906 ------------ Net cash used in operating activities...................... (11,235,246) ------------ Cash flows from investing activities: Purchase of property and equipment............................. (2,089,249) Cash used in acquisition of businesses, net of cash acquired... (12,728,991) ------------ Cash used in investing activities.......................... (14,818,240) ------------ Cash flows from financing activities: Proceeds from issuance of common stock......................... 76,748 Proceeds from issuance of Class A, convertible preferred stock......................................................... 21,000,000 Proceeds from revolving credit facility........................ 8,150,000 ------------ Net cash provided by financing activities.................. 29,226,748 ------------ Net increase in cash and cash equivalents........................ 3,173,262 Cash and cash equivalents at beginning of period................. -- ------------ Cash and cash equivalents at end of period....................... $ 3,173,262 ============ Supplemental disclosure of cash flows information: Cash paid for interest......................................... $ -- Cash paid for income taxes..................................... $ --
The accompanying notes are an integral part of the consolidated financial statements. F-6 ANSWERTHINK CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: Nature of Business AnswerThink Consulting Group, Inc. (the "Company") is a rapidly growing provider of knowledge-based consulting and information technology ("IT") services to Fortune 1000 companies and other sophisticated buyers. The Company addresses its clients' strategic business needs by offering a wide range of integrated services or solutions, including benchmarking, process transformation, software package implementation, electronic commerce, decision support technology, technology architecture and integration and Year 2000 solutions. Organization On April 23, 1997, the Company and the initial investors in the Company (the "Initial Investors") entered into a stock purchase agreement (the "Stock Purchase Agreement") pursuant to which the Company sold 6,800,000 shares to the Initial Investors of the Company's Class A Convertible Preferred Stock, par value of $.001 per share (the "Class A Preferred Stock"). Such shares of Class A Preferred Stock were sold at $3.00 per share, for total proceeds of $20.4 million. In May 1997, certain senior executives of the Company purchased an additional 200,000 shares of Class A Preferred Stock at $3.00 per share. Each share of Class A Preferred Stock is convertible into four shares of the Company's Common Stock, par value $.001 per share (the "Common Stock"). Pursuant to the Stock Purchase Agreement, certain of the Initial Investors have the option to purchase from the Company an additional 200,000 shares of Class A Preferred Stock at $3.00 per share. See Note 15. Management's Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation The Consolidated Financial Statements include AnswerThink Consulting Group, Inc. and its subsidiaries. All material intercompany accounts and transactions have been eliminated. Revenue Recognition The Company recognizes revenues as work is performed on a contract by contract basis, adjusted for any anticipated losses in the period in which any such losses are identified. To date, the Company has not experienced any material losses. Out-of-pocket expenses are reimbursed by clients and are offset against expenses incurred. Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The calculation includes only the vested portion of common shares issued to employees under employment agreements and does not include shares which have not yet vested. The calculation also does not include shares which vest only if certain future events occur. Accordingly, common shares outstanding for per share purposes, is significantly lower than actual shares issued and outstanding. F-7 ANSWERTHINK CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Loss per share assuming dilution is computed by dividing net loss by the weighted average number of common shares outstanding, increased by assumed conversion of other potentially dilutive securities during the period. Potentially dilutive shares which have not been included in the diluted per share calculation include 17,803,304 unvested shares under the employment agreements and 17,856,809 shares from assumed conversion of convertible preferred stock because their effects would be anti-dilutive due to the loss incurred by the Company. Accordingly, for the period presented, diluted net loss per common share is the same as basic net loss per common share. Fiscal Year The Company's fiscal year ends on the Friday closest to December 31. The fiscal year for the Company will generally consist of a 52-week period. Fiscal year 1997 ended on January 2, 1998. References to a year in these financial statements relate to a fiscal year rather than a calendar year. Cash and Cash Equivalents The Company considers all short-term investments with maturities of three months or less when purchased to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. At times, such investments may be in excess of the F.D.I.C. insurance limits. The Company has not experienced any loss to date on these investments. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life of the assets ranging from three to five years. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for betterments and major improvements are capitalized. The carrying amount of assets sold or retired and related accumulated depreciation are removed from the accounts in the year of disposal and any resulting gains or losses are included in the statement of operations. Intangible Assets Goodwill, related to the acquisitions, is being amortized over 15 years on a straight-line basis. The Company recorded amortization expense of $137,729 for the period April 23, 1997 (date of inception) through January 2, 1998. The carrying value of goodwill is subject to periodic review of realizability. Income Taxes The Company records income taxes using the liability method. Under this method, the Company records deferred taxes based on temporary taxable and deductible differences between the tax bases of the Company's assets and liabilities and their financial reporting bases. A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized. Concentration of Credit Risk The Company provides its services primarily to Fortune 1000 companies and other sophisticated buyers of IT consulting services. The Company performs ongoing credit evaluations of its major customers and maintains reserves for potential credit losses. Such losses have been insignificant. During the period April 23, 1997 (date of inception) through January 2, 1998, two customers accounted for approximately 13% of net revenues. F-8 ANSWERTHINK CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Recent Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This statement is effective for financial statements for periods beginning after December 15, 1997. Management believes that this standard will not result in significantly greater disclosure than what is already contained in these financial statements. In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information" which establishes standards for public business enterprises to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. This statement is effective for financial statements for periods beginning after December 15, 1997. In light of the Company's formation during the current year, management is evaluating the requirements of this standard and its applicability to the Company. 2. ACQUISITIONS AND INVESTING ACTIVITIES: On August 1, 1997, the Company acquired Relational Technologies, Inc., ("RTI") an Atlanta, Georgia, based information technology consulting and Oracle software implementation company for 2,441,400 restricted shares of Common Stock issued to RTI's stockholders valued at approximately $610,000. On October 13, 1997, the Company acquired all of the outstanding shares of The Hackett Group, Inc. ("Hackett") an Ohio based consulting firm specializing in benchmarking and process transformation primarily to Fortune 500 companies. The original purchase price payable to the sole stockholder of Hackett consisted of approximately $6,500,000 in cash, a $5,143,000 promissory note and 888,000 restricted shares of Common Stock valued at approximately $355,000. The note and the restricted shares are subject to certain earn-out provisions. The note is payable in three separate installments. As of January 2, 1998, the Company had recorded $3,750,000 bearing interest at a rate of 12% per annum, for additional purchase consideration under the promissory note due to the seller on March 31, 1998 based on achievement of earnings targets for 1997. The second installment obligation of $497,000 is due March 31, 1999, and the third installment obligation of $896,000 is due March 31, 2000. The obligations for the second and third installment payments bear interest at a rate of 8% per annum. A significant portion of the purchase price for the Hackett acquisition was allocated to in-process research and development technology, resulting in a $4,000,000 charge to the Company's operations in the quarter ended January 2, 1998. These charges were valued using a risk adjusted cash flow model, under which projected income and expenses attributable to the purchased technology were identified, and potential income streams were discounted for risks and uncertainties, including the stage of development of the technology, viability of target markets, rapidly changing nature of the industry and other factors. See Note 15. On November 12, 1997, the Company acquired all of the outstanding shares of Delphi Partners, Inc. ("Delphi") for approximately $7,400,000 in cash plus 1,120,000 restricted shares of Common Stock valued at $840,000. The sellers are also entitled to contingent consideration of up to a maximum of $2,500,000 to be paid by April 30, 1999 based on the achievement of certain pre-tax profit targets as defined. Delphi is an information systems consulting services firm focused primarily on applications developed by PeopleSoft, Inc. All the acquisitions made by the Company have been accounted for using the purchase method of accounting. Accordingly, the results of operations of the acquired companies are included in the Company's consolidated results of operations from the respective dates of acquisition. Contingent consideration, to the extent earned, will be recorded as additional goodwill. F-9 ANSWERTHINK CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The aggregate consideration for the Company's acquisitions has been allocated to the assets and liabilities acquired based upon their respective fair values. The components of the purchase price allocation, including fees and expenses, are as follows: Fair value of net assets acquired (primarily accounts receivable) excluding cash acquired......................... $ 2,258,892 Goodwill..................................................... 12,081,339 In-process research and development technology............... 4,000,000 Common Stock issued.......................................... (1,861,240) Note payable-earned additional purchase consideration........ (3,750,000) ----------- Cash used in acquisitions of businesses, net of cash ac- quired...................................................... $12,728,991 ===========
The following information presents the unaudited pro forma condensed results of operations for the period April 23, 1997 (date of inception) through January 2, 1998 as if the Company's acquisitions of RTI, Hackett and Delphi had occurred on April 23, 1997. The pro forma adjustments include additional amortization and interest expense in the amount of approximately $362,000 and $420,000, respectively. The pro forma results are presented for informational purposes only and are not necessarily indicative of the future results of operations of the Company or the results of operations of the Company had the acquisitions occurred on April 23, 1997.
PRO FORMA RESULTS OF OPERATIONS ----------------- Net revenues............................................... $ 28,816,510 Net loss................................................... $(11,102,240) Net loss per common share--basic and diluted............... $ (0.73)
3. PROPERTY AND EQUIPMENT: Property and equipment consists of the following:
AS OF JANUARY 2, 1998 ---------- Equipment........................................................ $2,446,319 Furniture and fixtures........................................... 235,257 Leasehold improvements........................................... 51,375 ---------- Total cost..................................................... 2,732,951 Less accumulated depreciation.................................... (237,656) ---------- $2,495,295 ==========
4. ACCRUED EXPENSES AND OTHER LIABILITIES: Accrued expenses and other liabilities consists of the following:
AS OF JANUARY 2, 1998 ---------- Accrued payroll and payroll related expenses..................... $3,019,519 Other accrued expenses........................................... 1,106,735 ---------- $4,126,254 ==========
F-10 ANSWERTHINK CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. BORROWINGS UNDER REVOLVING CREDIT FACILITY: On November 7, 1997, the Company entered into an agreement with Bank Boston, N.A. ("Bank Boston") for a $10 million revolving credit facility (the "Credit Facility"), maturing on November 7, 2000. The Company's obligation under the Credit Facility is collateralized by all of the assets of the Company. The Credit Facility may be increased to $20 million if certain future earnings and performance criteria are satisfied. The total amount outstanding as of January 2, 1998 is $8,150,000 at varying rates, principally LIBOR plus 2.25-3.25% (weighted average 8.5% rate at January 2, 1998). The Credit Facility contains, among other things, the maintenance of certain financial covenants such as minimum levels of earnings, minimum liquidity ratios, and debt as a percentage of cash flow. Pursuant to the Credit Facility, BankBoston was granted an option to purchase up to 33,333 shares of Class B Preferred Stock. See Note 15. 6. NOTES PAYABLE TO STOCKHOLDERS: Notes payable to stockholders consists of the following:
AS OF JANUARY 2, 1998 ---------- Notes payable-earned additional purchase consideration.............. $3,750,000 Other notes payable................................................. 300,000 ---------- Total notes payable to stockholders............................... $4,050,000 ==========
The Company issued a note for $5,143,000 payable to Gregory P. Hackett in connection with the Company's purchase of Hackett. Payment of the note is contingent on achievement of earnings targets as defined. As of January 2, 1998, $3,750,000 had been earned by Mr. Hackett. The note bears interest at 12%. See Note 15. The Company has two notes amounting to $300,000 payable to the two former principals of Delphi. The notes bear interest at 6% per annum with principal and accrued interest due on March 31, 1999. 7. LEASE COMMITMENTS: The Company and its subsidiaries have operating lease agreements for its premises that expire on various dates through 2004. The operating lease agreements for premises are subject to escalation. Rent expense for the period April 23, 1997 (date of inception) through January 2, 1998, was approximately $300,000. Minimum future lease commitments under noncancelable operating leases in effect at January 2, 1998, are presented as follows: 1998............................................................. $ 919,915 1999............................................................. 1,064,178 2000............................................................. 992,218 2001............................................................. 905,736 2002............................................................. 912,310 Thereafter....................................................... 658,207 ---------- Total minimum lease payments................................... $5,452,564 ==========
F-11 ANSWERTHINK CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. INCOME TAXES: The Company generated a loss for financial reporting purposes of approximately $12.1 million for the period April 23, 1997 (date of inception) through January 2, 1998. The temporary differences between the loss for financial reporting purposes and the loss for tax purposes arise primarily from differences in the lives of depreciable assets and the accrual of certain expenses for financial reporting purposes that are not allowable deductions for tax purposes until the year they are paid. The amounts of those temporary differences as of January 2, 1998 are not significant. The Net Operating Loss ("NOL") for tax purposes differs from the NOL for financial reporting purposes due to the write-off of acquired in-process research and development technology and the amortization of goodwill. The tax NOL amounted to approximately $8.0 million at January 2, 1998. Current accounting standards require that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their bases for financial reporting purposes. Future tax benefits such as NOLs are required to be recognized to the extent that realization of such benefits is more likely than not. In light of the loss experienced during the year and that the current year is the first year of operations, a valuation allowance has been established for the entire deferred tax asset attributed to the NOL carryforward. 9. RESTRICTED STOCK AND STOCK OPTIONS: As of January 2, 1998, the Company has sold an aggregate of 27,469,700 restricted shares to employees of the Company at nominal purchase prices per share. Each employee executed an employment agreement or a restricted stock agreement with the Company providing for, among other things, the manner in which restricted shares will vest. In general, a certain percentage of restricted shares will begin to vest upon the second anniversary from the purchase date of such shares and will become fully vested either by the fourth or sixth anniversary from the purchase date so long as the holder remains an employee. In connection with the formation of the Company, certain of the Company's employees and one director received 7,040,000 restricted shares of Common Stock which will vest in their entirety at such time following completion of an initial public offering and upon achieving either certain revenue targets or maintaining a price per share above a certain level. In the event these shares vest, the Company will recognize a non-cash compensation charge on the vesting date equal to the aggregate fair value of the shares vesting on such dates. Shares of restricted stock are issued to employees and other representatives of acquired companies. Employees vest in these shares over periods up to five years and, in certain cases, upon achieving certain revenue targets. The market value of the restricted stock at the time of grant is recorded as unearned compensation in a separate component of stockholders' equity and amortized as compensation expense ratably over the vesting periods. At January 2, 1998, 1,863,300 shares of such restricted stock had been issued. As of January 2, 1998, the Company has granted options to purchase an aggregate of 1,415,812 shares of Common Stock to employees at an exercise price of $1.25 per share which was at or above the estimated market price of the Common Stock at the dates of grants. Options granted will be exercisable in accordance with the terms specified in each option agreement entered into between the Company and each optionee. As long as the optionee remains an employee, all such options become exercisable in increments of 50%, 25%, and 25% on the second, third and fourth anniversary of the date of issuance thereof, respectively. In accordance with Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company is required to disclose pro forma net income (loss) information as F-12 ANSWERTHINK CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) if compensation expense related to the fair value of the options granted had been included in earnings (losses). The fair value of option grants is estimated using the Black-Scholes option pricing model with the following assumptions used for the 1997 grants: a ten-year expected life, a volatility factor of zero, a risk-free interest rate of 6.0% and no dividend payments. The weighted average remaining life of the options granted at January 2, 1998 is 9.7 years. In light of the loss experienced during the year and that the current year is the first year of operations, the Company's options had essentially no value. Had the fair value method of accounting been applied to the Company's stock options, the Company's net loss and loss per share, on a pro forma basis, would not be materially different from the net loss and loss per share reported. 10. CONVERTIBLE PREFERRED STOCK: Preferred Stockholders are entitled to a $3.00 liquidation preference per share in the event of liquidation, dissolution or winding up of the Company. Each share of Preferred Stock is convertible on a four-for-one basis to Common Stock and is entitled to non-cumulative dividends if and when declared by the Board of Directors. Holders of Preferred Stock have certain redemption rights defined in the Amended and Restated Articles of Incorporation but do not have preemptive rights. To the extent not redeemed or converted, remaining shares of the convertible Preferred Stock will be redeemed at their liquidation value on April 22, 2004. 11. STOCKHOLDERS' EQUITY: During 1997, the board of directors authorized a four-for-one stock split in the form of a stock dividend which has been reflected retroactively in the statement of stockholders' equity. All share and per share amounts presented in the consolidated financial statements and notes thereto have been retroactively adjusted to reflect the stock split. 12. SETTLEMENT COSTS: Certain of the Company's key executives and other management employees resigned from a "Big Six" accounting firm during the first quarter of 1997. The accounting firm initiated litigation in connection with such resignations and the formation of the Company arising out of activities alleged to have constituted a breach of non-competition and non-solicitation obligations. This litigation was settled, and the Company, its key executives, certain other management employees and certain of its stockholders are subject to certain provisions contained in the settlement agreement. Settlement costs consist primarily of payments to certain key executives and certain other management employees of the Company relating to the obligations assumed by the Company for compensation earned during the period from December 1, 1996 to the date of the Company's inception by such employees and legal fees incurred in connection with the ensuing litigation. 13. LITIGATION: The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business. In the opinion of management, the final disposition of such matters will not have a material adverse effect on the financial position or results of operations of the Company. 14. RELATED PARTY TRANSACTION: The Company purchases most of its computer hardware and software from a distributor that is owned in part by three senior executives and directors of the Company. During the year, the Company purchased approximately $1.5 million from this distributor. F-13 ANSWERTHINK CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 15. SUBSEQUENT EVENTS: (a) On February 24, 1998, the Company sold an additional 200,000 shares of Class A Preferred Stock to certain of the Initial Investors and their affiliates. (b) On March 5, 1998, the Company issued 33,333 shares of Class B Convertible Preferred Stock with a liquidation value of $15.00 per share to an affiliate of BankBoston at a price of $15.00 per share. Each share of Class B Convertible Preferred Stock is convertible into four shares of Common Stock. (c) On March 12, 1998, the Company entered into an amendment with the sole stockholder of Hackett to waive the earn-out provisions and to extend the due date on the $3,750,000 note obligation owed to such stockholder from March 31, 1998 to the earlier of the completion of a public offering of shares by the Company or January 15, 1999. F-14 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Delphi Partners, Inc. Marlton, New Jersey We have audited the accompanying balance sheets of Delphi Partners, Inc. as of October 24, 1997 and December 31, 1996, and the related statements of operations, stockholders' equity, and cash flows for the period January 1, 1997 through October 24, 1997 and for the years ended December 31, 1996 and 1995. 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, the financial statements referred to above present fairly, in all material respects, the financial position of Delphi Partners, Inc. as of October 24, 1997 and December 31, 1996 and the results of its operations and its cash flows for the period January 1, 1997 through October 24, 1997 and for the years ended December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Miami, Florida February 27, 1998 F-15 DELPHI PARTNERS, INC. BALANCE SHEETS OCTOBER 24, 1997 AND DECEMBER 31, 1996
AS OF ------------------------ OCTOBER 24, DECEMBER 31, 1997 1996 ----------- ------------ ASSETS Current assets: Cash and cash equivalents........................... $ 960,402 $ 270,325 Accounts receivable and unbilled revenue............ 2,681,315 2,693,499 Prepaid expenses and other current assets........... 47,989 12,796 ---------- ---------- Total current assets.............................. 3,689,706 2,976,620 Property and equipment, net........................... 275,650 160,445 Other assets.......................................... 18,228 10,725 ---------- ---------- Total assets...................................... $3,983,584 $3,147,790 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................... $ 407,083 $ 351,452 Accrued expenses.................................... 1,311,046 818,072 Deferred income taxes............................... 91,200 91,200 ---------- ---------- Total current liabilities......................... 1,809,329 1,260,724 Notes payable to stockholders......................... 300,000 -- Long-term portion of capital leases................... 39,707 -- ---------- ---------- Total liabilities................................. 2,149,036 1,260,724 ---------- ---------- Stockholders' equity: Common stock, $.01 par value, authorized 30,000 shares; issued and outstanding 20,000 and 100 shares at October 24, 1997 and December 31, 1996, respectively....................................... 200 1 Additional paid-in capital.......................... 9,800 9,999 Retained earnings................................... 1,824,548 1,877,066 ---------- ---------- Total stockholders' equity........................ 1,834,548 1,887,066 ---------- ---------- Total liabilities and stockholders' equity........ $3,983,584 $3,147,790 ========== ==========
The accompanying notes are an integral part of the financial statements. F-16 DELPHI PARTNERS, INC. STATEMENTS OF OPERATIONS FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 24, 1997 AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1997 1996 1995 ---------- ---------- ---------- Net revenues................................... $9,773,836 $7,843,972 $3,158,812 Costs and expenses: Project personnel and expenses............... 4,429,935 3,981,245 1,642,405 Selling, general and administrative.......... 4,666,891 2,684,245 1,219,560 ---------- ---------- ---------- Total costs and operating expenses......... 9,096,826 6,665,490 2,861,965 ---------- ---------- ---------- Income from operations......................... 677,010 1,178,482 296,847 Interest income.............................. -- 25,225 3,058 ---------- ---------- ---------- Income before income taxes..................... 677,010 1,203,707 299,905 Provision for income taxes..................... 99,275 67,131 17,600 ---------- ---------- ---------- Net income..................................... $ 577,735 $1,136,576 $ 282,305 ========== ========== ==========
The accompanying notes are an integral part of the financial statements. F-17 DELPHI PARTNERS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 24, 1997 AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
COMMON ADDITIONAL STOCK COMMON PAID-IN RETAINED SHARES STOCK CAPITAL EARNINGS TOTAL ------ ------ ---------- ---------- ---------- Balance as of December 31, 1994........................ 100 $ 1 $9,999 $ 458,185 $ 468,185 Net income................... -- -- -- 282,305 282,305 ------ ---- ------ ---------- ---------- Balance as of December 31, 1995........................ 100 1 9,999 740,490 750,490 Net income................... -- -- -- 1,136,576 1,136,576 ------ ---- ------ ---------- ---------- Balance as of December 31, 1996........................ 100 1 9,999 1,877,066 1,887,066 Net income................... -- -- -- 577,735 577,735 Stockholders' distributions.. -- -- -- (630,253) (630,253) Two hundred-for-one stock split....................... 19,900 199 (199) -- -- ------ ---- ------ ---------- ---------- Balance as of October 24, 1997........................ 20,000 $200 $9,800 $1,824,548 $1,834,548 ====== ==== ====== ========== ==========
The accompanying notes are an integral part of the financial statements. F-18 DELPHI PARTNERS, INC. STATEMENTS OF CASH FLOWS FOR THE PERIOD JANUARY 1, 1997 THROUGH OCTOBER 24, 1997 AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1997 1996 1995 ---------- ----------- --------- Cash flows from operating activities: Net income............................... $ 577,735 $ 1,136,576 $ 282,305 ---------- ----------- --------- Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization.......... 81,848 47,652 27,361 Deferred income taxes.................. -- 54,800 10,200 Changes in assets and liabilities: Decrease (increase) in accounts receivable and unbilled revenue....... 12,184 (1,750,925) (346,882) (Increase) decrease in prepaid expenses and other current assets.............. (35,193) 1,627 (8,898) Increase in other assets............... (7,503) (8,525) -- Increase in accounts payable........... 55,631 231,597 81,247 Increase in accrued expenses........... 492,974 597,171 132,345 ---------- ----------- --------- Total adjustments.................... 599,941 (826,603) (104,627) ---------- ----------- --------- Net cash flows provided by operations........................ 1,177,676 309,973 177,678 ---------- ----------- --------- Cash flows from investing activities: Purchases of property and equipment...... (157,346) (98,499) (119,053) ---------- ----------- --------- Net cash flows used in investing activities........................ (157,346) (98,499) (119,053) ---------- ----------- --------- Cash flows from financing activities Stockholders' distributions.............. (630,253) -- -- Stockholders' advances................... 300,000 -- (4,295) ---------- ----------- --------- Net cash flows used in financing activities........................ (330,253) -- (4,295) ---------- ----------- --------- Net increase in cash and cash equivalents.. 690,077 211,474 54,330 Cash and cash equivalents at beginning of year...................................... 270,325 58,851 4,521 ---------- ----------- --------- Cash and cash equivalents at end of year... $ 960,402 $ 270,325 $ 58,851 ========== =========== ========= Supplemental disclosure of cash flows information: Cash paid for interest................... $ 295 $ 65 $ 211 Cash paid for taxes...................... $ 29,935 $ 3,895 $ 3,600 Non cash purchases of property and equipment recorded as capital leases.... $ 39,707 $ -- $ --
The accompanying notes are an integral part of the financial statements. F-19 DELPHI PARTNERS, INC. NOTES TO FINANCIAL STATEMENTS 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: Nature of Business Delphi Partners, Inc. ("the Company") is a specialist software consulting firm, offering a broad range of consulting and related training services to clients implementing client/server human resources and financial applications. Its primary service offering is the implementation of PeopleSoft software. The Company provides its services to clients in a broad range of industries including high technology, retail, and consumer and industrial products. Management's Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes The Company has elected to be taxed as an S corporation under the provisions of the Internal Revenue Code. Under those provisions, the Company does not pay federal income taxes on its taxable income. The stockholders reflect on their individual federal income tax returns their respective share of the Company's taxable income or loss subject to statutory limitations. The Company accounts for state income taxes (in those states which do not recognize S-Corporation status) in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" which requires the use of the "liability method" of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the year's income taxable for state income tax reporting purposes. Revenue Recognition The Company derives substantially all of its revenues from information technology and management consulting, software development and implementation, and package software evaluation and implementation services. Revenues from management consulting and package software evaluation and implementation services are recognized as the service is provided, principally on a time and material basis. Losses on projects in progress are recognized when known. Net revenues exclude reimbursable expenses charged to clients. Fiscal Year The Company's fiscal year ends on the Friday closest to December 31. The fiscal year for the Company will generally consist of a 52-week period. References to a year in these financial statements relate to a fiscal year rather than a calendar year. Cash and Cash Equivalents The Company considers all short-term investments with maturities of three months or less when purchased to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. At times, such investments may be in excess of the F.D.I.C. insurance limits. The Company has not experienced any loss to date on these investments. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life of the assets of five years. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for betterments and major improvements are F-20 DELPHI PARTNERS, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) capitalized. The carrying amounts of assets sold or retired and related accumulated depreciation are removed from the accounts in the year of disposal and any gains or losses are included in the statement of operations. Concentration of Credit Risk The Company provides its services primarily to Fortune 1000 companies and other sophisticated buyers of IT consulting services. The Company performs ongoing credit evaluations of its major customers and maintains reserves for potential credit losses to the extent they are identified. Such losses have been insignificant and are within management's expectations. Three, six and seven major customers comprised approximately 25%, 53% and 65% of net revenues for the period January 1, 1997 through October 24, 1997 and for the years ended December 31, 1996 and 1995, respectively. Recent Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This statement is effective for fiscal years beginning after December 15, 1997. In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information" which establishes standards for public business enterprises to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. This statement is effective for financial statements for periods beginning after December 15, 1997. Management is currently evaluating the requirements of SFAS No. 130 and No. 131 and their applicability to the Company. See Note 9. 2. PROPERTY AND EQUIPMENT: Property and equipment consists of the following as of October 24, 1997 and December 31, 1996:
OCTOBER 24, DECEMBER 31, 1997 1996 ----------- ------------ Furniture and equipment............................. $ 434,801 $237,748 Less accumulated depreciation....................... (159,151) (77,303) --------- -------- $ 275,650 $160,445 ========= ========
3. NOTES PAYABLE TO STOCKHOLDERS: The Company has two notes amounting to $300,000 payable to its principal stockholders who are also current employees. The notes bear interest at 6% per annum with principal and accrued interest due on March 31, 1999. 4. PROVISION FOR TAXES: The provision for state taxes consists of the following for the period January 1, 1997 through October 24, 1997 and for the years ended December 31, 1996 and 1995:
1997 1996 1995 ------- ------- ------- Current.............................................. $99,275 $12,331 $ 7,400 ======= ======= ======= Deferred............................................. $ -- $54,800 $10,200 ======= ======= =======
F-21 DELPHI PARTNERS, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 5. LEASE COMMITMENTS: The Company has two operating lease agreements for premises. One expires on March 31, 2000 and the other is month-to-month. The operating lease agreement is subject to real estate escalation and reimbursement of operating costs. Rent expense for the period January 1, 1997 through October 24, 1997 and for the years ended December 31, 1996 and 1995 was approximately $90,000, $72,000 and $31,000, respectively. Minimum future lease commitments under the noncancelable operating lease in effect at October 24, 1997, is presented as follows: 1998............................................................... $ 69,003 1999............................................................... 52,773 2000............................................................... 13,332 -------- Total minimum lease payments..................................... $135,108 ========
6. ACCRUED EXPENSES: Accrued expenses consists of the following as of October 24, 1997 and December 31, 1996:
OCTOBER 24, DECEMBER 31, 1997 1996 ----------- ------------ Accrued payroll and payroll related expenses....... $1,117,263 $765,472 State income taxes payable......................... 75,729 6,331 Profit sharing plan payable........................ 55,059 45,700 Other.............................................. 62,995 569 ---------- -------- $1,311,046 $818,072 ========== ========
7. PROFIT SHARING PLAN: On January 1, 1996, the Company adopted a 401(K) plan (the "Plan") which covers substantially all of its employees. Under the Plan, the Company matches 25% of the employee contributions up to a maximum of $1,000 per year and may contribute an additional discretionary amount. The Company contributed $61,376 for the period January 1, 1997 through October 24, 1997 and $45,700 for the year ended December 31, 1996. 8. COMMON STOCK: On April 30, 1997, the directors of the Company increased the number of authorized shares of common stock from 100 shares to 20,000 shares, and in connection with such amendment, effected a 200 for 1 split of each share of the outstanding common stock. 9. SUBSEQUENT EVENT: On November 12, 1997, the Company agreed to be acquired by AnswerThink Consulting Group, Inc. ("AnswerThink"). Under the terms of that transaction, AnswerThink acquired all of the outstanding stock of the Company in exchange for cash and AnswerThink stock. F-22 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholder of The Hackett Group, Inc. Hudson, Ohio We have audited the accompanying balance sheets of The Hackett Group, Inc. as of September 30, 1997 and December 31, 1996, and the related statements of operations, stockholder's equity, and cash flows for the period January 1, 1997 through September 30, 1997 and for the years ended December 31, 1996 and 1995. 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, the financial statements referred to above present fairly, in all material respects, the financial position of The Hackett Group, Inc. as of September 30, 1997 and December 31, 1996 and the results of its operations and its cash flows for the period January 1, 1997 through September 30, 1997 and for the years ended December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Miami, Florida February 27, 1998 F-23 THE HACKETT GROUP, INC. BALANCE SHEETS
AS OF -------------------------- SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ ASSETS Current assets: Cash and cash equivalents......................... $ 3,118,511 $ 240,532 Accounts receivable and unbilled revenue.......... 1,368,626 1,097,129 Prepaid expenses and other current assets......... -- 25,000 ----------- ---------- Total current assets............................ 4,487,137 1,362,661 Property and equipment, net......................... 419,545 447,538 Other assets........................................ 1,596 1,088 ----------- ---------- Total assets.................................... $ 4,908,278 $1,811,287 =========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable.................................. $ 115,676 $ 13,511 Accrued expenses and other current liabilities.... 2,096,212 240,346 Deferred revenue.................................. 300,000 140,000 ----------- ---------- Total current liabilities....................... 2,511,888 393,857 ----------- ---------- Commitments and contingencies Stockholder's equity: Common stock, no par value, authorized 750 shares; issued and outstanding 100 shares at September 30, 1997 and December 31, 1996................... 10,000 10,000 Retained earnings................................. 2,386,390 1,407,430 ----------- ---------- Total stockholder's equity...................... 2,396,390 1,417,430 ----------- ---------- Total liabilities and stockholder's equity...... $ 4,908,278 $1,811,287 =========== ==========
The accompanying notes are an integral part of the financial statements. F-24 THE HACKETT GROUP, INC. STATEMENTS OF OPERATIONS FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997 AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1997 1996 1995 ---------- ---------- ---------- Net revenues................................. $6,453,588 $6,119,195 $7,648,257 Costs and expenses: Project personnel and expenses............. 4,225,353 4,774,989 5,008,046 Selling, general and administrative........ 870,988 1,528,048 1,661,703 ---------- ---------- ---------- Total costs and operating expenses......... 5,096,341 6,303,037 6,669,749 ---------- ---------- ---------- Income (loss) from operations................ 1,357,247 (183,842) 978,508 Interest income............................ 78,713 70,170 81,544 ---------- ---------- ---------- Net income (loss)............................ $1,435,960 $ (113,672) $1,060,052 ========== ========== ==========
The accompanying notes are an integral part of the financial statements. F-25 THE HACKETT GROUP, INC. STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997 AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
COMMON STOCK COMMON RETAINED SHARES STOCK EARNINGS TOTAL ------ -------- ----------- ----------- Balance as of December 31, 1994...... 100 $ 10,000 $ 660,111 $ 670,111 Stockholder's distributions.......... -- -- (199,061) (199,061) Net income........................... -- -- 1,060,052 1,060,052 --- -------- ----------- ----------- Balance as of December 31, 1995...... 100 10,000 1,521,102 1,531,102 Net loss............................. -- -- (113,672) (113,672) --- -------- ----------- ----------- Balance as of December 31, 1996...... 100 10,000 1,407,430 1,417,430 Stockholder's distributions.......... -- -- (457,000) (457,000) Net income........................... -- -- 1,435,960 1,435,960 --- -------- ----------- ----------- Balance as of September 30, 1997..... 100 $ 10,000 $ 2,386,390 $ 2,396,390 === ======== =========== ===========
The accompanying notes are an integral part of the financial statements. F-26 THE HACKETT GROUP, INC. STATEMENTS OF CASH FLOWS FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997 AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1997 1996 1995 ---------- --------- ---------- Cash flows from operating activities: Net income (loss).......................... $1,435,960 $(113,672) $1,060,052 ---------- --------- ---------- Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation and amortization............. 85,348 83,015 52,705 Changes in assets and liabilities: (Increase) decrease in accounts receivable and unbilled revenue..................... (271,497) 99,955 (739,094) Decrease (increase) in prepaid expenses and other current and non-current assets................................... 24,492 (25,600) 119 Increase in accounts payable.............. 102,165 98,611 -- Increase (decrease) in accrued expenses and other current liabilities............ 1,398,866 (12,841) (37,158) Increase in deferred revenue.............. 160,000 140,000 -- ---------- --------- ---------- Total adjustments....................... 1,499,374 383,140 (723,428) ---------- --------- ---------- Net cash flows provided by operations... 2,935,334 269,468 336,624 ---------- --------- ---------- Cash flows from investing activities: Purchases of property and equipment........ (57,355) (124,788) (165,086) ---------- --------- ---------- Net cash flows used in investing activities............................. (57,355) (124,788) (165,086) ---------- --------- ---------- Cash flows from financing activities: Stockholder's distributions................ -- -- (199,061) ---------- --------- ---------- Net cash flows used in financing activities............................. -- -- (199,061) ---------- --------- ---------- Net increase (decrease) in cash and cash equivalents................................ 2,877,979 144,680 (27,523) Cash and cash equivalents at beginning of period..................................... 240,532 95,852 123,375 ---------- --------- ---------- Cash and cash equivalents at end of period.. $3,118,511 $ 240,532 $ 95,852 ========== ========= ========== Supplemental disclosure of cash flows information: Cash paid for interest.................... $ -- $ -- $ -- Cash paid for taxes....................... $ -- $ -- $ -- Non cash stockholder's distributions...... $ 457,000 $ -- $ --
The accompanying notes are an integral part of the financial statements. F-27 THE HACKETT GROUP, INC. NOTES TO FINANCIAL STATEMENTS 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: Nature of Business The Hackett Group, Inc. (the "Company") is a consulting firm, principally focused on providing benchmarking and business process redesign services in the finance and human resources functional areas. The Company provides its services mostly to Fortune 500 companies located in the United States and Canada. Management's Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition The Company derives substantially all of its revenues from benchmarking and management consulting. Revenues are recognized as the service is provided, principally on a fixed fee basis. Losses on projects in progress are recognized when known. Net revenues exclude reimbursable expenses charged to clients. Deferred revenue arises whenever clients pay the Company in advance of services provided. Cash and Cash Equivalents The Company considers all short-term investments with maturities of three months or less when purchased to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. At times, such investments may be in excess of the F.D.I.C. insurance limits. The Company has not experienced any loss to date on these investments. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life of the assets of five years. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for betterments and major improvements are capitalized. The carrying amounts of assets sold or retired and related accumulated depreciation are eliminated in the year of disposal and the resulting gains and losses are included in income. Income Taxes The Company has elected to be taxed as an S corporation under the provisions of the Internal Revenue Code. Under those provisions, the Company does not pay federal income taxes on its taxable income. The stockholder reflects on his individual federal income tax return the Company's taxable income or loss subject to statutory limitations. Concentration of Credit Risk The Company provides its services primarily to Fortune 500 companies. The Company performs ongoing credit evaluations of its major customers and maintains reserves for potential credit losses to the extent they are identified. Such losses have been insignificant and are within management's expectations. Six, five and six major customers comprised approximately 53%, 41% and 57% of net revenues for the period January 1, 1997 through September 30, 1997 and for the years ended December 31, 1996 and 1995, respectively. F-28 THE HACKETT GROUP, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Recent Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This statement is effective for fiscal years beginning after December 15, 1997. In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information" which establishes standards for public business enterprises to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. This statement is effective for financial statements for periods beginning after December 15, 1997. Management is currently evaluating the requirements of SFAS No. 130 and No. 131 and their applicability to the Company. (See Note 6). 2. PROPERTY AND EQUIPMENT: Property and equipment consists of the following as of September 30, 1997 and December 31, 1996:
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ Equipment........................................ $ 595,512 $ 541,157 Furniture and fixtures........................... 111,413 108,413 Leasehold improvements........................... 23,049 23,049 --------- --------- Total cost....................................... 729,974 672,619 Less accumulated depreciation.................... (310,429) (225,081) --------- --------- $ 419,545 $ 447,538 ========= ========= 3. LEASE COMMITMENTS: The Company has an operating lease agreement for its premises that expires in September 2000. The future minimum rental is currently $8,317 per month and is subject to an annual adjustment based on the Consumer Price Index which will be capped between 3% and 6%. The Company subleases a portion of its premises at $1,425 per month, subject to the same increases as the Company's lease and during the same term. The Company has also entered into two operating leases for office equipment. Rent expense for the period January 1, 1997 through September 30, 1997 and for the years ended December 31, 1996 and 1995 was $90,054, $80,505 and $50,528, respectively. Minimum future lease and sublease commitments under noncancelable operating leases in effect at September 30, 1997, are presented as follows: LEASES SUBLEASE ------------- ------------ 1998............................................. $109,211 $ 17,789 1999............................................. 107,901 18,323 2000............................................. 73,666 12,457 2001............................................. 240 -- --------- --------- Total minimum lease and sublease payments...... $291,018 $ 48,569 ========= =========
F-29 THE HACKETT GROUP, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES: Accrued expenses and other current liabilities consist of the following as of September 30, 1997 and December 31, 1996:
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ Accrued payroll and payroll-related expenses.... $1,623,000 $233,401 Shareholder distribution........................ 457,000 -- Other accrued expenses.......................... 16,212 6,945 ---------- -------- $2,096,212 $240,346 ========== ========
5. PROFIT SHARING PLAN: The Company maintains a 401(K) and profit sharing plan (the "Plan") which covers substantially all of its employees. Under the Plan, employees may contribute up to 15% of their compensation through salary deferrals. The Company matches such contributions on a discretionary basis. The Company did not record any expense relating to profit sharing for the period January 1, 1997 through September 30, 1997. The Company recorded an expense in the amount of $212,379 and $87,589 for the years ended December 31, 1996 and 1995, respectively. 6. SUBSEQUENT EVENT: On October 13, 1997, the Company agreed to be acquired by AnswerThink Consulting Group, Inc. ("AnswerThink"). Under the terms of that transaction, AnswerThink acquired all of the outstanding stock of the Company in exchange for cash and AnswerThink stock. F-30 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Relational Technologies, Inc. Norcross, Georgia We have audited the accompanying balance sheets of Relational Technologies, Inc. as of July 31, 1997 and December 31, 1996, and the related statements of operations, stockholders' equity, and cash flows for the period January 1, 1997 through July 31, 1997 and for the year ended December 31, 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, the financial statements referred to above present fairly, in all material respects, the financial position of Relational Technologies, Inc. as of July 31, 1997 and December 31, 1996 and the results of its operations and its cash flows for the period January 1, 1997 through July 31, 1997 and for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Miami, Florida February 27, 1998 F-31 RELATIONAL TECHNOLOGIES, INC. BALANCE SHEETS JULY 31, 1997 AND DECEMBER 31, 1996
AS OF ----------------------- JULY 31, DECEMBER 31, 1997 1996 ---------- ------------ ASSETS Current assets: Cash and cash equivalents............................ $ 157,195 $ -- Accounts receivable and unbilled revenue............. 1,643,528 879,738 Other current assets................................. 70,049 52,821 ---------- ---------- Total current assets............................... 1,870,772 932,559 Property and equipment, net............................ 57,574 55,776 Other assets........................................... 11,287 8,910 Goodwill, net of amortization of $72,076 and $50,140, respectively.......................................... 490,000 511,936 ---------- ---------- Total assets....................................... $2,429,633 $1,509,181 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Cash overdraft....................................... $ -- $ 115,562 Accounts payable..................................... 89,666 146,029 Accrued expenses and other current liabilities....... 1,262,572 368,448 Line of credit....................................... -- 26,073 Long-term debt, current portion...................... -- 33,642 Deferred revenue..................................... 155,775 38,000 ---------- ---------- Total current liabilities.......................... 1,508,013 727,754 Long-term debt and note payable to stockholder....... -- 206,008 ---------- ---------- Total liabilities.................................. 1,508,013 933,762 ---------- ---------- Stockholders' equity: Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 100,000 shares at July 31, 1997 and December 31, 1996................. 100,000 100,000 Retained earnings.................................... 821,620 475,419 ---------- ---------- Total stockholders' equity......................... 921,620 575,419 ---------- ---------- Total liabilities and stockholders' equity......... $2,429,633 $1,509,181 ========== ==========
The accompanying notes are an integral part of the financial statements. F-32 RELATIONAL TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS FOR THE PERIOD JANUARY 1, 1997 THROUGH JULY 31, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1996
1997 1996 ---------- ---------- Net revenues............................................ $4,529,401 $4,378,789 Costs and expenses: Project personnel and expenses........................ 2,392,033 2,421,739 Selling, general and administrative................... 1,200,111 1,199,926 ---------- ---------- Total costs and operating expenses.................... 3,592,144 3,621,665 ---------- ---------- Income from operations.................................. 937,257 757,124 Interest expense........................................ (60,312) (111,289) ---------- ---------- Income before income taxes.............................. 876,945 645,835 Provision for income taxes.............................. -- (251,889) ---------- ---------- Net income.............................................. $ 876,945 $ 393,946 ========== ==========
The accompanying notes are an integral part of the financial statements. F-33 RELATIONAL TECHNOLOGIES, INC. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD JANUARY 1, 1997 THROUGH JULY 31, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1996
COMMON COMMON RETAINED STOCK SHARES STOCK EARNINGS TOTAL ------------ --------- --------- --------- Balance as of December 31, 1995... 100,000 $ 100,000 $ 81,473 $ 181,473 Net income........................ -- -- 393,946 393,946 ------- --------- --------- --------- Balance as of December 31, 1996... 100,000 100,000 475,419 575,419 Net income........................ -- -- 876,945 876,945 Stockholders' distributions....... -- -- (530,744) (530,744) ------- --------- --------- --------- Balance as of July 31, 1997....... 100,000 $ 100,000 $ 821,620 $ 921,620 ======= ========= ========= =========
The accompanying notes are an integral part of the financial statements. F-34 RELATIONAL TECHNOLOGIES, INC. STATEMENTS OF CASH FLOWS FOR THE PERIOD JANUARY 1, 1997 THROUGH JULY 31, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1996
1997 1996 --------- --------- Cash flows from operating activities: Net income.............................................. $ 876,945 $ 393,946 --------- --------- Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization......................... 54,805 78,149 Changes in assets and liabilities: Increase in accounts receivable and unbilled revenue.. (763,790) (486,874) Increase in other current assets...................... (17,228) (14,868) Decrease in accounts payable.......................... (56,363) (5,408) Increase in accrued expenses and other current liabilities.......................................... 712,061 278,857 Increase (decrease) in deferred revenue............... 117,775 (9,725) Increase in other assets.............................. (2,377) (8,910) --------- --------- Total adjustments.................................... 44,883 (168,779) --------- --------- Net cash flows provided by operations.................... 921,828 225,167 --------- --------- Cash flows from investing activities: Purchases of property and equipment..................... (34,667) (69,813) --------- --------- Net cash flows used in investing activities.......... (34,667) (69,813) --------- --------- Cash flows from financing activities: Stockholders' distributions............................. (348,681) -- Proceeds from issuance of long-term debt................ -- 250,000 Principal payments on long-term debt.................... (239,650) (10,350) Decrease in bank line of credit......................... (26,073) (110,854) Payments under earn-out termination agreement........... -- (360,000) --------- --------- Net cash flows used in financing activities.............. (614,404) (231,204) --------- --------- Net increase (decrease) in cash and cash equivalents..... 272,757 (75,850) Cash and cash equivalents at beginning of period......... (115,562) (39,712) --------- --------- Cash and cash equivalents at end of period............... $ 157,195 $(115,562) ========= ========= Supplemental disclosure of cash flows information: Cash paid for interest................................ $ 60,312 $ 111,289 Cash paid for taxes................................... $ -- $ 336,000 Non cash stockholders' distributions.................. $ 182,063 $ --
The accompanying notes are an integral part of the financial statements. F-35 RELATIONAL TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: Nature of Business Relational Technologies, Inc. ("the Company") is a nationwide provider of a wide range of technology consulting services. Its primary offerings are: Management Consulting (business process reengineering, technology assessments and financial modeling), Oracle software package implementation, Technical Services (customization, product development, RDBMS, and Unix), and IS facilities management. The Company provides its services to clients in a broad range of industries including high technology, consumer and industrial products, diversified services and government. Management's Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition The Company derives substantially all of its revenues from information technology and management consulting, software development and implementation, and package software evaluation and implementation services. Revenues from management consulting and package software evaluation and implementation services are recognized as the service is provided, principally on a time and material basis. Losses on projects in progress are recognized when known. Net revenues exclude reimbursable expenses charged to clients. Deferred revenue arises whenever clients pay the Company in advance of services provided. Cash and Cash Equivalents The Company considers all short-term investments with maturities of three months or less when purchased to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. At times, such investments may be in excess of the F.D.I.C. insurance limits. The Company has not experienced any loss to date on these investments. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life of the assets ranging from 3 to 7 years. Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for betterments and major improvements are capitalized. The carrying amounts of assets sold or retired and related accumulated depreciation are removed from the accounts in the year of disposal and any resulting gains or losses are included in the statement of operations. Intangible Assets Goodwill, related to the acquisition of the Company during 1995, is being amortized over fifteen years on a straight-line basis. The Company recorded amortization expense of $21,936 and $37,605 for the period January 1, 1997 through July 31, 1997 and for the year ended December 31, 1996, respectively. The carrying value of goodwill is subject to periodic review of realizability. F-36 RELATIONAL TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Income Taxes On January 1, 1997, the Company elected to be taxed as an S corporation under the provisions of the Internal Revenue Code. Under those provisions, the Company does not pay federal income taxes on its taxable income. The stockholders will reflect on their individual income tax returns their respective share of the Company's taxable income or loss subject to statutory limitations. Concentration of Credit Risk The Company provides its services primarily to Fortune 1000 companies. The Company performs ongoing credit evaluations of its major customers and maintains reserves for potential credit losses to the extent they are identified. Such losses have been insignificant and are within management's expectations. Nine and seven major customers comprised approximately 83% and 74% of net revenues for the period January 1, 1997 through July 31, 1997 and for the year ended December 31, 1996, respectively. Recent Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This statement is effective for fiscal years beginning after December 15, 1997. In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an Enterprise and Related Information" which establishes standards for public business enterprises to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. This statement is effective for financial statements for periods beginning after December 15, 1997. Management is currently evaluating the requirements of SFAS No. 130 and No. 131 and their applicability to the Company. (See Note 8). F-37 RELATIONAL TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 2. PROPERTY AND EQUIPMENT: Property and equipment consists of the following as of July 31, 1997 and December 31, 1997:
JULY 31, DECEMBER 31, 1997 1996 -------- ------------ Computer equipment.................................... $125,453 $92,761 Software.............................................. 15,116 15,116 Furniture and leasehold improvements.................. 4,611 2,636 -------- ------- Total cost.......................................... 145,180 110,513 Less accumulated depreciation......................... (87,606) (54,737) -------- ------- $ 57,574 $55,776 ======== =======
3. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES: Accrued expenses and other current liabilities consists of the following as of July 31, 1997 and December 31, 1996:
JULY 31, DECEMBER 31, 1997 1996 ---------- ------------ Accrued payroll and payroll related expenses......... $ 749,853 $295,482 Other accrued expenses............................... 330,656 72,966 Stockholder distribution............................. 182,063 -- ---------- -------- $1,262,572 $368,448 ========== ========
4. DEBT: The Company has a $700,000 bank line of credit which bears interest at the prime rate and expires on August 31, 1997. The line of credit is collateralized by the personal assets of a stockholder of the Company. As of July 31, 1997 and December 31, 1996, the Company had a balance outstanding of $0 and $26,073, respectively. The Company had a $200,000 note payable to a stockholder which bore interest at 12% per annum with a maturity date of February 28, 1998. The terms of the note required monthly interest payments with the principal balance due at maturity. The note was collateralized by the accounts receivable of the Company. The note was paid during 1997. The Company had a $50,000 note payable to an unaffiliated lender which bore interest at 12% per annum. The terms of the note required monthly installments of principal and interest through the maturity date of March 1, 1998. The note was collateralized by the accounts receivable of the Company. The principal balance as of December 31, 1996 was $39,650. The note was paid during 1997. Maturities of long-term debt as of December 31, 1996 is presented as follows: Total debt......................................................... $239,650 Less current portion............................................... (33,642) -------- Long-term portion.................................................. $206,008 ========
F-38 RELATIONAL TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 5. LEASE COMMITMENTS: The Company has operating lease agreements for premises and equipment that expire on various dates through March, 2000. The operating lease agreements for premises are subject to escalation. Rent expense for the period January 1, 1997 through July 31, 1997 and for the year ended December 31, 1996 was $66,401 and $99,833, respectively. Minimum future lease commitments under noncancelable operating leases in effect at July 31, 1997 are presented as follows: 1998................................................................ $37,653 1999................................................................ 15,045 2000................................................................ 3,825 ------- Total minimum lease payments...................................... $56,523 =======
6. PROFIT SHARING PLAN: The Company maintains a 401(K) plan (the "Plan") which covers substantially all of its employees. Under the Plan, employer contributions are discretionary. There were no contributions to the Plan for the period January 1, 1997 through July 31, 1997 and for the year ended December 31, 1996, contributions totaled $30,000. 7. EARN-OUT TERMINATION AGREEMENT: The asset purchase agreement dated September 1, 1995 between the current stockholders and the prior owners of the Company, contained earn-out provisions as a part of the purchase price. On January 25, 1996, an agreement was reached with the seller to settle future payments under the agreement for a sum of $360,000. The amount due was accrued as of December 31, 1995, and was paid during the first quarter of 1996. 8. SUBSEQUENT EVENT: On August 1, 1997, the Company agreed to be acquired by AnswerThink Consulting Group, Inc. ("AnswerThink"). Under the terms of that transaction, AnswerThink acquired all of the outstanding stock of the Company in exchange for AnswerThink stock. F-39 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following Unaudited Pro Forma Consolidated Statement of Operations of the Company for the period April 23, 1997 (date of inception) through January 2, 1998 has been prepared to reflect (i) the acquisitions of Relational Technologies, Inc., The Hackett Group, Inc. and Delphi Partners, Inc. on August 1, 1997, October 13, 1997 and November 12, 1997, respectively (the "Acquisitions"), (ii) to give effect to the Shares of Common Stock being offered by the Company and the application of the net proceeds therefrom, and (iii) to give effect to the conversion (the "Conversion") into a total of 14,320,260 shares of Common Stock of all of the Company's outstanding shares of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock immediately prior to the Offering, as if such transactions had occurred as of April 23, 1997. The Unaudited Pro Forma Consolidated Financial Information is not indicative of the results that would have occurred if the transactions had occurred on the dates indicated or which may be realized in the future. The Unaudited Pro Forma Consolidated Financial Information should be read in conjunction with the historical financial statements of the companies acquired in connection with the Acquisitions and the Company's Consolidated Financial Statements and the notes thereto included elsewhere in this Prospectus. PF-1 ANSWERTHINK CONSULTING GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD APRIL 23, 1997 (DATE OF INCEPTION) THROUGH JANUARY 2, 1998
HISTORICAL -------------------------- PRO FORMA THE COMPANY ACQUISITIONS PRO FORMA OFFERING AS (A) (B) ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED ------------ ------------ ----------- ------------ ----------- ------------ Net revenues............ $ 14,848,172 $13,968,338 $ -- $28,816,510 $ -- $ 28,816,510 Costs and expenses: Project personnel and expenses............. 13,333,921 6,668,208 -- 20,002,129 -- 20,002,129 Selling, general and administrative....... 8,084,558 5,558,301 362,390 (C) 14,005,249 -- 14,005,249 Settlement costs...... 1,902,608 -- -- 1,902,608 (G) -- 1,902,608 ------------ ----------- --------- ------------ -------- ------------ Total costs and operating expenses... 23,321,087 12,226,509 362,390 35,909,986 -- 35,909,986 ------------ ----------- --------- ------------ -------- ------------ Income (loss) from operations............. (8,472,915) 1,741,829 (362,390) (7,093,476) (7,093,476) Other income (expense): In-process research and development technology........... (4,000,000) -- -- (4,000,000)(E) -- (4,000,000) Interest income (expense), net....... 382,463 28,437 (419,664)(D) (8,764) 535,219 (F) 526,455 ------------ ----------- --------- ------------ -------- ------------ Net income (loss) (H)... $(12,090,452) $ 1,770,266 $(782,054) $(11,102,240) $535,219 $(10,567,021) ============ =========== ========= ============ ======== ============ Net loss per common share--basic and diluted................ $ (0.95) $ (0.73) ============ ============ Weighted average common shares outstanding..... 12,684,637 15,268,574
See accompanying notes to Unaudited Pro Forma Consolidated Statement of Operations PF-2 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS A. Represents the historical consolidated statement of operations of the Company for the period April 23, 1997 (date of inception) through January 2, 1998. B. Represents the historical consolidated statement of operations of the Acquisitions from April 23, 1997 (date of inception) until such Acquisitions were completed by the Company. C. Adjusts goodwill amortization expense to reflect the allocation of the purchase price for each of the Acquisitions beginning on April 23, 1997 over a 15-year period. D. Adjustment to interest as if debt incurred in connection with the Acquisitions was outstanding for the period April 23, 1997 (date of inception) through January 2, 1998. The interest rate on the debt is variable but was assumed to be approximately 8.5% for purposes of the pro forma adjustment which represents the weighted average interest rate on the debt as of January 2, 1998. E. Represents an unusual charge for in-process research and development relating to the acquisition of The Hackett Group, Inc. F. Upon the closing of the Offering, the Company will retire all outstanding debt except certain notes payable to stockholders in the amount of $300,000 which are payable on March 31, 1999 and which were assumed as part of the Delphi Partners, Inc. acquisition. Interest expense has been adjusted to reflect the use of a portion of the Offering proceeds to retire the outstanding debt. G. Settlement costs consist primarily of payments to certain key executives and certain other management employees of the Company relating to the obligations assumed by the Company for compensation earned by such employees during the Dispute Period and legal fees incurred in connection with the ensuing litigation. Management believes that the majority of these costs are non-recurring. H. No income tax provision is required due to the Company's current tax loss and the inability of the Company to currently use the benefits of its loss carryforward. PF-3 [AnswerThink Consulting Group, Inc. Logo] PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth all fees and expenses, other than the underwriting discounts and commissions, payable by the Registrant in connection with the sale of the Common Stock being registered. All amounts shown are estimates except for the registration fee and the NASD filing fee.
AMOUNT ------- Securities and Exchange Commission registration fee................. $20,650 NASD filing fee..................................................... 7,500 Nasdaq National Market fee.......................................... * Blue sky qualification fees and expenses............................ * Accounting fees and expenses........................................ * Legal fees and expenses............................................. * Transfer agent and registrar fees................................... 10,000 Miscellaneous expenses.............................................. * ------- Total............................................................. $ * =======
-------- * To be provided supplementally. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Bylaws of the Registrant provide for the indemnification of the Registrant's directors and officers to the fullest extent authorized by, and subject to the conditions set forth in the General Corporation Law of the State of Delaware (the "DGCL") against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA taxes or penalties and amounts paid or to be paid in settlement), except that the Registrant will indemnify a director or officer in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Registrant's Board of Directors. The indemnification provided under the Bylaws includes the right to be paid by the Registrant the expenses (including attorneys' fees) in advance of any proceeding for which indemnification may be had in advance of its final disposition, provided that the payment of such expenses (including attorneys' fees) incurred by a director or officer in advance of the final disposition of a proceeding may be made only upon delivery to the Registrant of an undertaking by or on behalf of such director or officer to repay all amounts so paid in advance if it is ultimately determined that such director or officer is not entitled to be indemnified. Pursuant to the Bylaws, if a claim for indemnification is not paid by the Registrant within 60 days after a written claim has been received by the Registrant, the claimant may at any time thereafter bring an action against the Registrant to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant will be entitled to be paid also the expense of prosecuting such action. As permitted by the DGCL, the Registrant's Certificate of Incorporation provides that directors of the Registrant shall not be liable to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, relating to unlawful payment of dividends or unlawful stock purchase or redemption or (iv) for any transaction from which the director derived an improper personal benefit. As a result of this provision, the Registrant and its stockholders may be unable to obtain monetary damages from a director for breach of his or her duty of care. Under the Bylaws, the Registrant has the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Registrant, or is or was serving at the request of the Registrant as a director, officer, employee, partner (limited or general) or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, against any liability asserted against such person or incurred by such person in any such capacity, or arising out of such person's status as such, and II-1 related expenses, whether or not the Registrant would have the power to indemnify such person against such liability under the provisions of the DGCL. The Registrant maintains director and officer liability insurance on behalf of its directors and officers. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES (a) On April 23, 1997, in connection with the formation of the Registrant's predecessor AnswerThink Consulting Group, Inc., a Florida corporation ("ACG- Florida"), ACG-Florida issued 2,400,000 common shares, par value $.01 per share ("ACG-Florida Common Stock") to Ted A. Fernandez, the Registrant's President, Chief Executive Officer and Chairman, Allan R. Frank, the Registrant's Chief Technology Officer and a director, Ulysses S. Knotts, III, the Registrant's Executive Vice President, Sales and Marketing and a director, and Edmund R. Miller, a director of the Company, as the initial shareholders of ACG-Florida pursuant to an agreement (each, a "Senior Executive Agreement") entered into with each of such persons. Such shares were sold at par ($.01 per share) for an aggregate consideration of $2,400. These shares were issued without registration under the Securities Act of 1993, as amended (the "Securities Act") in reliance upon an exemption from registration under Section 4(2) thereof ("Section 4(2)"). (b) ACG-Florida sold to Golder, Thoma, Cressey, Rauner Fund V, L.P. ("GTCR V"), MG Capital Partners II, L.P. ("MG"), Gator Associates, Ltd. ("Gator"), Tara Ventures, Ltd. ("Tara," and together with Gator, the "Miller Group") (GTCR V, MG and the Miller Group are sometimes referred to herein collectively as the "Initial Investors"), pursuant to a purchase agreement, dated as of April 23, 1997, a total of 6,800,000 shares of ACG-Florida Class A Convertible Preferred Stock, par value $.01 per share (the "ACG-Florida Class A Preferred Stock"), at a purchase price of $3.00 per share for an aggregate consideration of $20,400,000. At the time of issuance, each share of ACG-Florida Class A Preferred Stock was convertible into one share of ACG-Florida Common Stock. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2). (c) On July 10, 1997, Messrs. Fernandez, Frank and Knotts and three other employees of the Registrant exercised options to acquire to total of 200,000 shares of ACG-Florida Class A Preferred Stock at an exercise of $3.00 per share for an aggregate consideration of $600,000. These shares of ACG-Florida Class A Preferred Stock were issued without registration under the Securities Act in reliance on an exemption contained in Section 4(2). Messrs. Fernandez, Frank and Knotts and those three other employees immediately converted these 200,000 shares of ACG-Florida Class A Preferred Stock and received in exchange therefor a total of 200,000 shares of ACG-Florida Common Stock. These shares of ACG-Florida Common Stock were issued without registration under the Securities Act in reliance on an exemption contained in Section 3(a)(9) thereof ("Section 3(a)(9)"). (d) Also on July 10, 1997, the Initial Investors converted a portion of the ACG-Florida Class A Preferred Stock owned by them and received in exchange therefor a total of 3,453,268 shares of ACG-Florida Common Stock. These shares were issued without registration under the Securities Act in reliance on an exemption contained in Section 3(a)(9). (e) On July 11, 1997 pursuant to employment-related agreements entered into with three employees of the Registrant, ACG-Florida issued to such employees a total of 1,900,000 shares of ACG-Florida Common Stock at a purchase price of $.01 per share for an aggregate consideration of $1,900. These shares were issued without registration under the Securities Act in reliance on an exemption from registration under Section 4(2). (f) Effective as of July 17, 1997, ACG-Florida amended its Articles of Incorporation to increase the number of authorized shares of ACG-Florida Common Stock to 100,000,000 and to change the par value of the ACG-Florida Common Stock and the ACG-Florida Class A Preferred Stock to $.001 per share. As a result of the split of the ACG-Florida Common Stock, each share of ACG- Florida Class A Preferred Stock was convertible into four shares of ACG- Florida Common Stock as of July 17, 1997. Also on July 17, 1997, ACG-Florida declared a four-for-one stock split of the ACG-Common Stock and issued 23,859,804 shares of ACG-Florida Common II-2 Stock to the holders of ACG-Common Stock as of such date. These shares were issued without registration under the Securities Act in reliance on an exemption contained in Section 3(a)(9). (g) On July 31, 1997 pursuant to an employment-related agreement entered into with John F. Brennan, the Registrant's Executive Vice President, Acquisitions and Strategic Planning, ACG-Florida issued 280,000 shares to Mr. Brennan at a purchase price of $.0025 per share for an aggregate consideration of $700. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2). (h) On August 1, 1997, in connection with the merger Relational Technologies, Inc. ("RTI") into ACG-Florida, ACG-Florida issued 2,441,400 shares of ACG-Florida Common Stock to the eight former shareholders of RTI in exchange for (i) all of the issued and outstanding capital stock of RTI and (ii) with respect to 996,500 of such shares, for additional consideration in the amount of $.0025 per share for an aggregate consideration of $2,491.25. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2). (i) In October 1997, ACG-Florida issued 888,000 shares of ACG-Florida Common Stock to the sole former shareholder of The Hackett Group, Inc. (the "Hackett Group") at a purchase price of $.0025 per share for an aggregate consideration of $2,220 in connection with the acquisition by ACG-Florida of Hackett Group. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2). (j) Also in October 1997, ACG-Florida issued a total of 484,000 shares of ACG-Florida Common Stock to six employees of the Hackett Group at a purchase price of $.0025 per share for an aggregate consideration of $1,210 pursuant to employment agreements entered into with each of such persons in connection with the acquisition by ACG-Florida of Hackett Group. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2). (k) On November 12, 1997, ACG-Florida issued a total of 1,120,000 shares of ACG-Florida Common Stock to eight former shareholders of Delphi Partners, Inc. ("Delphi") at a purchase price of $.0025 per share for an aggregate consideration of $2,800 in connection with the acquisition by ACG-Florida of Delphi which became a wholly owned subsidiary of ACG-Florida as of such date. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2). (l) Also on November 12, 1997, the Company issued 7,500 shares of ACG-Common Stock to a financial advisory firm in exchange for (i) financial advisory services rendered to ACG-Florida by such firm in connection with the acquisition of Delphi and (ii) payment of a purchase price of $.0025 per share for an aggregate consideration of $18.75. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2). (m) On February 24, 1998, ACG-Florida issued to GTCR V, MG, GTCR Associates V, ("GTCR Associates") and Miller Capital Management, Inc., ("Miller Capital"), a total of 200,000 shares of ACG-Florida Class A Preferred Stock at a purchase price of $3.00 per share for an aggregate consideration of $600,000 pursuant to a purchase agreement among ACG-Florida and such persons. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2). (n) On March 5, 1998, ACG-Florida issued 33,333 shares of Class B Convertible Preferred Stock, par value $.001 per share (the "ACG-Florida Class B Preferred Stock" and, together with the ACG-Florida Class A Preferred Stock, the "ACG-Florida Preferred Stock"), to FSC Corp., a Massachusetts corporation and an affiliate of BankBoston, N.A. ("FSC"), at a purchase price of $15.00 per share for an aggregate consideration of $499,995. Each share of ACG- Florida Class B Preferred Stock is convertible into four shares of ACG-Florida Common Stock. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 4(2) of the Securities Act. II-3 (o) Between July 22, 1997 and February 16, 1998, pursuant to employment agreements and restricted stock agreements, ACG-Florida issued a total of 9,812,512 shares of ACG-Florida Common Stock at a purchase price of $.0025 per share to certain of its employees for an aggregate consideration of $24,531.28. ACG-Florida subsequently repurchased 28,000 of these shares at a purchase price of $.0025 per share for a total purchase price of $70. These shares were issued without registration under the Securities Act in reliance upon an exemption from registration under Section 3(b) thereof and Rule 504 of Regulation D promulgated thereunder. (p) On March 13, 1998, the Registrant issued 1,000 shares of the Registrant's Common Stock, par value $.01 per share, to ACG-Florida at a purchase price of $1.00 per share for an aggregate consideration of $1,000 in connection with the formation of the Registrant as a wholly owned subsidiary of ACG-Florida. These shares were issued without registration under the Securities Act in reliance upon an exemption for registration under Section 4(2). Each of the foregoing transactions was, or will be, effected without an underwriter. II-4 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits 1.1* Form of Underwriting Agreement 2.1* Agreement and Plan of Merger dated April , 1998 between ACG-Florida and the Registrant 3.1 Certificate of Incorporation of the Registrant 3.2 Bylaws of the Registrant 5.1* Opinion of Hogan & Hartson L.L.P. 9.1 Shareholders Agreement dated April 23, 1997 among the Registrant, GTCR V, MG, the Miller Group, Messrs. Fernandez, Frank, Knotts and Miller and certain other shareholders of the Registrant parties thereto 9.2 Amendment No. 1 to Shareholders Agreement dated February 24, 1998 9.3* Letter Agreement to amend Shareholders Agreement 9.4 Form of Restricted Securities Agreement dated April 23, 1997 among the Initial Investors and each of Messrs. Fernandez, Frank, Knotts and Miller 10.1* Purchase Agreement dated April 23, 1997 among ACG-Florida, GTCR V, MG, Gator and Tara 10.2* Series A Preferred Stock Purchase Agreement dated February 24, 1998 among ACG-Florida, GTCR V, GTCR Associates and Miller Capital 10.3* Stock Purchase Agreement dated March , 1998 between ACG-Florida and FSC 10.4* Form of Amended and Restated Registration Agreement dated among the Registrant, GTCR V, MG, GTCR Associates, Miller Capital, FSC, Messrs. Fernandez, Frank, Knotts and Miller and certain other shareholders of the Registrant named therein 10.5* Form of Amended and Restated Registration Agreement among the Registrant and the eight former shareholders of RTI 10.6* Revolving Credit Agreement dated as of November 7, 1997 among ACG- Florida, BankBoston, N.A. and certain other lenders party thereto and BankBoston, N.A. as agent 10.7* Agreement and Plan of Merger dated as of August 1, 1997 among ACG- Florida, RTI and all of the shareholders of RTI 10.8* Stock Purchase Agreement dated as of October 13, 1997 by and between ACG-Florida and Gregory P. Hackett relating to the acquisition of Hackett Group 10.9* Amendment dated March 12, 1998 to Stock Purchase Agreement dated as of October 13, 1997 by and between ACG-Florida and Gregory P. Hackett relating to the acquisition of Hackett Group 10.10* Stock Purchase Agreement dated as of November 12, 1997 by and between ACG-Florida and the shareholders of Delphi relating to the acquisition of Delphi 10.11* Registrant's 1998 Stock Option and Incentive Plan 10.12 Form of Senior Management Agreement dated April 23, 1997 between the Registrant and each of Messrs. Fernandez, Frank and Knotts 10.13 Senior Management Agreement dated April 23, 1997 between the Registrant and Mr. Miller 10.14* Form of Employment Agreement to be entered into between the Registrant and each of Messrs. Fernandez, Frank and Knotts 10.15 Employment Agreement dated July 22, 1997 between the Registrant and Mr. San Miguel 10.16 Restricted Stock Agreement dated July 22, 1997 between the Registrant and Mr. San Miguel 10.17* Form of Employment Agreement to be entered into between the Registrant and Mr. San Miguel 10.18* Confidential Settlement Agreement 21.1 Subsidiaries of the Registrant 23.1 Consent of Coopers & Lybrand L.L.P. (Registrant's financial statements) 23.2 Consent of Coopers & Lybrand L.L.P. (financial statements of Delphi, Hackett Group and RTI) 23.3* Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1) 24.1 Power of Attorney (see page II-8) 27.1 Financial Data Schedule
- - -------- * To be filed by amendment. II-5 (b) Financial Statement Schedules Schedules have been omitted because the information required to be set forth therein is not applicable or is included elsewhere in the Financial Statements or the notes thereto. ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as may be required by the underwriter to permit prompt delivery to each purchaser. 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 described under Item 14 of this Registration Statement, 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 the 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-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on the 16th day of March, 1998. ANSWERTHINK CONSULTING GROUP, INC. /s/ Ted A. Fernandez By: _________________________________ Ted A. Fernandez President, Chief Executive Officer and Chairman II-7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ted A. Fernandez and Luis E. San Miguel, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, from such person and in each person's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement or any Registration Statement relating to this Registration Statement under Rule 462 and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated. NAME TITLE DATE /s/ Ted A. Fernandez President, Chief March 16, 1998 - - ------------------------------------- Executive Officer and TED A. FERNANDEZ Chairman (Principal Executive Officer) /s/ Luis E. San Miguel Executive Vice March 16, 1998 - - ------------------------------------- President, Finance LUIS E. SAN MIGUEL and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Allan R. Frank Executive Vice March 16, 1998 - - ------------------------------------- President, Chief ALLAN R. FRANK Technology Officer and Director /s/ Ulysses S. Knotts, III Executive Vice March 16, 1998 - - ------------------------------------- President, Sales and ULYSSES S. KNOTTS, III Marketing and Director /s/ Edmund R. Miller Director March 16, 1998 - - ------------------------------------- EDMUND R. MILLER /s/ Bruce Rauner Director March 16, 1998 - - ------------------------------------- BRUCE RAUNER /s/ William C. Kessinger Director March 16, 1998 - - ------------------------------------- WILLIAM C. KESSINGER II-8 EXHIBIT INDEX 1.1* Form of Underwriting Agreement 2.1* Agreement and Plan of Merger dated April , 1998 between ACG-Florida and the Registrant 3.1 Certificate of Incorporation of the Registrant 3.2 Bylaws of the Registrant 5.1* Opinion of Hogan & Hartson L.L.P. 9.1 Shareholders Agreement dated April 23, 1997 among the Registrant, GTCR V, MG, the Miller Group, Messrs. Fernandez, Frank, Knotts and Miller and certain other shareholders of the Registrant parties thereto 9.2 Amendment No. 1 to Shareholders Agreement dated February 24, 1998 9.3* Letter Agreement to amend Shareholders Agreement 9.4 Form of Restricted Securities Agreement dated April 23, 1997 among the Initial Investors and each of Messrs. Fernandez, Frank, Knotts and Miller 10.1* Purchase Agreement dated April 23, 1997 among ACG-Florida, GTCR V, MG, Gator and Tara 10.2* Series A Preferred Stock Purchase Agreement dated February 24, 1998 among ACG-Florida, GTCR V, GTCR Associates and Miller Capital 10.3* Stock Purchase Agreement dated March , 1998 between ACG-Florida and FSC 10.4* Form of Amended and Restated Registration Agreement dated among the Registrant, GTCR V, MG, GTCR Associates, Miller Capital, FSC, Messrs. Fernandez, Frank, Knotts and Miller and certain other shareholders of the Registrant named therein 10.5* Form of Amended and Restated Registration Agreement among the Registrant and the eight former shareholders of RTI 10.6* Revolving Credit Agreement dated as of November 7, 1997 among ACG- Florida, BankBoston, N.A. and certain other lenders party thereto and BankBoston, N.A. as agent 10.7* Agreement and Plan of Merger dated as of August 1, 1997 among ACG- Florida, RTI and all of the shareholders of RTI 10.8* Stock Purchase Agreement dated as of October 13, 1997 by and between ACG-Florida and Gregory P. Hackett relating to the acquisition of Hackett Group 10.9* Amendment dated , 1998 to Stock Purchase Agreement dated as of October 13, 1997 by and between ACG-Florida and Gregory P. Hackett relating to the acquisition of Hackett Group 10.10* Stock Purchase Agreement dated as of November 12, 1997 by and between ACG-Florida and the shareholders of Delphi relating to the acquisition of Delphi 10.11* Registrant's 1998 Stock Option and Incentive Plan 10.12 Form of Senior Management Agreement dated April 23, 1997 between the Registrant and each of Messrs. Fernandez, Frank and Knotts 10.13 Senior Management Agreement dated April 23, 1997 between the Registrant and Mr. Miller 10.14* Form of Employment Agreement to be entered into between the Registrant and each of Messrs. Fernandez, Frank and Knotts 10.15 Employment Agreement dated July 22, 1997 between the Registrant and Mr. San Miguel 10.16 Restricted Stock Agreement dated July 22, 1997 between the Registrant and Mr. San Miguel 10.17* Form of Employment Agreement to be entered into between the Registrant and Mr. San Miguel 10.18* Confidential Settlement Agreement 21.1 Subsidiaries of the Registrant 23.1 Consent of Coopers & Lybrand L.L.P. (Registrant's financial statements) 23.2 Consent of Coopers & Lybrand L.L.P. (financial statements of Delphi, Hackett Group and RTI) 23.3* Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1) 24.1 Power of Attorney (see page II-8) 27.1 Financial Data Schedule
- - -------- * To be filed by amendment. EX-3.1 2 EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF ANSWERTHINK CONSULTING GROUP, INC. TABLE OF CONTENTS
PAGE ---- Article 1. NAME............................................................ 1 Article 2. REGISTERED OFFICE AND AGENT..................................... 1 Article 3. PURPOSE AND POWERS.............................................. 1 Article 4. CAPITAL STOCK................................................... 1 4.1. Authorized Shares.................................................. 1 4.2. Common Stock....................................................... 2 4.2.1. Relative Rights.......................................... 2 4.2.2. Dividends................................................ 2 4.2.3. Dissolution, Liquidation, Winding Up..................... 2 4.2.4. Voting Rights............................................ 2 4.3. Preferred Stock.................................................... 3 4.4. Special Meetings................................................... 3 4.5. Action Without a Meeting........................................... 3 Article 5. INCORPORATOR.................................................... 4 Article 6. BOARD OF DIRECTORS.............................................. 4 6.1. Number; Election................................................... 4 6.2. Management of Business and Affairs of the Corporation.............. 4 6.3. Vacancies; Resignation; Removal.................................... 4 6.4. Limitation of Liability............................................ 5 Article 7. COMPROMISE OR ARRANGEMENTS...................................... 5 Article 8. AMENDMENT OF BYLAWS............................................. 6 Article 9. RESERVATION OF RIGHT TO AMEND CERTIFICATE OF INCORPORATION...... 6
-i- DELAWARE CERTIFICATE OF INCORPORATION OF ANSWERTHINK CONSULTING GROUP, INC. ARTICLE 1. NAME The name of this corporation is AnswerThink Consulting Group, Inc. (the "CORPORATION"). ARTICLE 2. REGISTERED OFFICE AND AGENT The registered office of the Corporation in the State of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The registered agent of the Corporation at such address shall be The Corporation Trust Company. ARTICLE 3. PURPOSE AND POWERS The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the "DELAWARE GENERAL CORPORATION LAW"). The Corporation shall have all power necessary or convenient to the conduct, promotion or attainment of such acts and activities. ARTICLE 4. CAPITAL STOCK 4.1. AUTHORIZED SHARES The total number of shares of all classes of stock that the Corporation shall have the authority to issue is 126,250,000, of which 125,000,000 of such shares shall be Common Stock, having a par value of $.01 per share ("COMMON STOCK"), and 1,250,000 of such shares shall be Preferred Stock, having a par value of $.01 per share ("PREFERRED STOCK"). 4.2. COMMON STOCK 4.2.1 RELATIVE RIGHTS The Common Stock shall be subject to all of the rights, privileges, preferences and priorities of the Preferred Stock as set forth in the certificate of designations filed to establish each series of Preferred Stock. Each share of Common Stock shall have the same relative rights as and be identical in all respects to all the other shares of Common Stock. 4.2.2. DIVIDENDS Whenever there shall have been paid, or declared and set aside for payment, to the holders of shares of any class of stock having preference over the Common Stock as to the payment of dividends, the full amount of dividends and of sinking fund or retirement payments, if any, to which such holders are respectively entitled in preference to the Common Stock, then dividends may be paid on the Common Stock and on any class or series of stock entitled to participate therewith as to dividends, out of any assets legally available for the payment of dividends thereon, but only when and as declared by the Board of Directors of the Corporation (the "BOARD"). 4.2.3. DISSOLUTION, LIQUIDATION, WINDING UP In the event of any dissolution, liquidation, or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock, and holders of any class or series of stock entitled to participate therewith, in whole or in part, as to the distribution of assets in such event, shall become entitled to participate in the distribution of any assets of the Corporation remaining after the Corporation shall have paid, or provided for payment of, all debts and liabilities of the Corporation and after the Corporation shall have paid, or set aside for payment, to the holders of any class of stock having preference over the Common Stock in the event of dissolution, liquidation or winding up the full preferential amounts (if any) to which they are entitled. 4.2.4. VOTING RIGHTS Each holder of shares of Common Stock shall be entitled to attend all special and annual meetings of the stockholders of the Corporation and, share for share and without regard to class, together with the holders of all other classes of stock entitled to attend such meetings and to vote (except any class or series of stock having special voting rights), to cast one vote for each outstanding share of Common Stock so held upon any matter or thing (including, without limitation, the election of one or more directors) properly considered and acted upon by the stockholders. -2- 4.3. PREFERRED STOCK The Board of Directors is authorized, subject to limitations prescribed by the Delaware General Corporation Law and the provisions of this Certificate of Incorporation, to provide, by resolution or resolutions from time to time and by filing a certificate of designations pursuant to the Delaware General Corporation Law, for the issuance of the shares of Preferred Stock in series, to establish from time to time the number of shares to be included in each such series, to fix the powers, designations, preferences and relative, participating, optional or other special rights of the shares of each such series and to fix the qualifications, limitations or restrictions thereof. 4.4. SPECIAL MEETINGS Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called (a) by the Board on its own behalf or one or more officers of the Corporation as provided in the bylaws or (b) by stockholders of the Corporation upon the written request of the holders of at least 80% of the securities of the Corporation outstanding and entitled to vote generally in the election of directors. 4.5. ACTION WITHOUT A MEETING Any action required or permitted to be taken at a stockholders' meeting may be taken without a meeting, without prior notice and without a vote, if the action is taken by persons who would be entitled to vote at a meeting and who hold shares having voting power equal to not less than the lesser of (a) 80% of the voting power of all shares of each class or series entitled to vote on such action or (b) the minimum number of votes of each class or series that would be necessary to authorize or take the action at a meeting at which all shares of each class or series entitled to vote were present and voted. The action must be evidenced by one or more written consents describing the action taken, signed by the stockholders entitled to take action without a meeting, and delivered to the Corporation in the manner prescribed by the Delaware General Corporation Law for inclusion in the minute book. No consent shall be effective to take the corporate action specified unless the number of consents required to take such action are delivered to the Corporation within 60 days of the delivery of the earliest-dated consent. Written notice of the action taken shall be given in accordance with the Delaware General Corporation Law to all stockholders who do not participate in taking the action who would have been entitled to notice if such action had been taken at a meeting having a record date on the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation. -3- ARTICLE 5. INCORPORATOR The name and mailing address of the incorporator (the "INCORPORATOR") are Ted A. Fernandez, c/o AnswerThink Consulting Group, Inc., 1401 Brickell Avenue, Suite 350, Miami, Florida 33131. ARTICLE 6. BOARD OF DIRECTORS 6.1. NUMBER; ELECTION The number of directors of the Corporation shall be such number as from time to time shall be fixed by, or in the manner provided in, the bylaws of the Corporation; provided, however, that the number of directors which shall ----------------- constitute the whole board shall not be fewer than five nor more than 15. The directorships (i.e., the particular seats on the Board) shall be classified into --- three classes as nearly equal in number as possible. Initially, and with respect to newly created or eliminated directorships resulting from an increase or decrease, respectively, in the number of directors, the Board shall determine and designate to which class of directorships each director belongs. The directors of one class shall be appointed by the Incorporator for a term expiring at the annual meeting of stockholders to be held in 1999. The directors of another class shall be appointed by the Incorporator for a term expiring at the annual meeting of stockholders to be held in 2000. The directors of another class shall be appointed by the Incorporator for a term expiring at the annual meeting of stockholders to be held in 2001. The term of any director elected at an annual meeting of stockholders shall expire at the annual meeting of stockholders held in the third year following the year of the director's election. Unless and except to the extent that the bylaws of the Corporation shall otherwise require, the election of directors of the Corporation need not be by written ballot. 6.2. MANAGEMENT OF BUSINESS AND AFFAIRS OF THE CORPORATION The business and affairs of the Corporation shall be managed by or under the direction of the Board. Except as otherwise provided in this Certificate of Incorporation, each director of the Corporation shall be entitled to one vote per director on all matters voted or acted upon by the Board. 6.3. VACANCIES; RESIGNATION; REMOVAL Vacancies and newly created directorships resulting from any increase in the number of directors of the Board may be filled only by the affirmative vote of a majority of the directors then in office, although fewer than a quorum, or by a sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of this -4- Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by the affirmative vote of a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Each director so chosen shall hold office until the next election of directors of the class to which such director was appointed, and until such director's successor is elected and qualified, or until the director's earlier death, resignation or removal. A director may resign at any time upon written notice to the Corporation, and the resignation shall take effect at the time it specifies, without any need for acceptance by the Board. In the event that one or more directors resigns from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, with the vote thereon to take effect when such resignation or resignations becomes effective. Directors may only be removed for cause upon the affirmative vote of at least two-thirds of the entire voting power of all the then-outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. 6.4. LIMITATION OF LIABILITY No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this provision shall not eliminate or limit the liability of a director (a) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation Law or (d) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this ARTICLE 6.4 shall be prospective only and shall not adversely affect any right or protection of, or any limitation of the liability of, a director of the Corporation existing at, or arising out of facts or incidents occurring prior to, the effective date of such repeal or modification. ARTICLE 7. COMPROMISE OR ARRANGEMENTS Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in -5- dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three- fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. ARTICLE 8. AMENDMENT OF BYLAWS In furtherance and not in limitation of the powers conferred by the Delaware General Corporation Law, the Board is expressly authorized and empowered to adopt, amend and repeal the bylaws of the Corporation. The bylaws of the Corporation may be adopted, amended or repealed by the stockholders of the Corporation only upon the affirmative vote of at least two-thirds of the entire voting power of all the then-outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. ARTICLE 9. RESERVATION OF RIGHT TO AMEND CERTIFICATE OF INCORPORATION The Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of any nature conferred upon stockholders, directors or any other persons by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this ARTICLE 9. * * * -6- IN WITNESS WHEREOF, the undersigned, being the Incorporator hereinabove named, for the purpose of forming a Corporation pursuant to the Delaware General Corporation Law, hereby certifies that the facts hereinabove stated are truly set forth, and accordingly executes this Certificate of Incorporation this 12th day of March, 1998. /s/ Ted A. Fernandez ------------------------------------- Ted A. Fernandez -7- EX-3.2 3 EXHIBIT 3.2 EXHIBIT 3.2 ANSWERTHINK CONSULTING GROUP, INC. BYLAWS ADOPTED AS OF March 12, 1998 TABLE OF CONTENTS
Page ---- 1. OFFICES....................................................1 1.1. Registered Office.....................................1 1.2. Other Offices.........................................1 2. MEETINGS OF STOCKHOLDERS...................................1 2.1. Place of Meetings.....................................1 2.2. Annual Meetings.......................................1 2.3. Special Meetings......................................3 2.4. Notice of Meetings....................................3 2.5. Waivers of Notice.....................................4 2.6. List of Stockholders..................................4 2.7. Quorum at Meetings....................................4 2.8. Voting and Proxies....................................5 2.9. Required Vote.........................................5 2.10. Inspectors...........................................6 3. DIRECTORS..................................................7 3.1. Powers................................................7 3.2. Number and Election...................................7 3.3. Meetings..............................................7 3.3.1. Regular Meetings...............................7 3.3.2. Special Meetings...............................7 3.3.3. Telephone Meetings.............................8 3.3.4. Action Without Meeting.........................8 3.3.5. Waiver of Notice of Meeting....................8 3.4. Quorum and Vote at Meetings...........................8 3.5. Committees of Directors...............................8 3.6. Compensation of Directors.............................9 4. OFFICERS...................................................9 4.1. Positions.............................................9 4.2. Chairman..............................................10 4.3. President.............................................10 4.4. Vice President........................................10 4.5. Secretary.............................................10 4.6. Assistant Secretary...................................11 4.7. Treasurer.............................................11 4.8. Assistant Treasurer...................................11 4.9. Term of Office........................................11
-i- 4.10. Compensation...............................................12 4.11. Fidelity Bonds.............................................12 5. CAPITAL STOCK....................................................12 5.1. Certificates of Stock; Uncertificated Shares................12 5.2. Lost Certificates...........................................12 5.3. Record Date.................................................13 5.3.1. Actions by Stockholders..............................13 5.3.2. Payments.............................................13 5.4. Stockholders of Record......................................13 6. INDEMNIFICATION; INSURANCE.......................................14 6.1. Authorization of Indemnification............................14 6.2. Right of Claimant to Bring Action Against the Corporation...15 6.3. Non-exclusivity.............................................16 6.4. Survival of Indemnification.................................16 6.5. Insurance...................................................16 7. GENERAL PROVISIONS...............................................16 7.1. Inspection of Books and Records.............................16 7.2. Dividends...................................................17 7.3. Reserves....................................................17 7.4. Execution of Instruments....................................17 7.5. Fiscal Year.................................................17 7.6. Seal........................................................17
-ii- BYLAWS OF ANSWERTHINK CONSULTING GROUP, INC. 1. OFFICES 1.1. REGISTERED OFFICE The registered office of the Corporation shall be in Wilmington, Delaware, and the initial registered agent in charge thereof shall be The Corporation Trust Company. 1.2. OTHER OFFICES The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors of the Corporation (the "BOARD") may from time to time determine or as may be necessary or useful in connection with the business of the Corporation. 2. MEETINGS OF STOCKHOLDERS 2.1. PLACE OF MEETINGS All meetings of the stockholders shall be held at such place as may be fixed from time to time by the Board, the Chairman or the President. 2.2. ANNUAL MEETINGS (a) The Corporation shall hold annual meetings of stockholders, commencing with the year 1999, on such date and at such time as shall be designated from time to time by the Board, the Chairman or the President. At each annual meeting, the stockholders shall elect by a plurality vote (as provided in SECTION 2.9 hereof) directors to succeed those whose terms expire at the time of the annual meeting. The nomination of persons for election to the Board and the proposal of any other business to be transacted at an annual meeting may be made only (i) by or at the direction of the Board or (ii) by any stockholder of record who gives notice in accordance with the procedures set forth in paragraph (b) of this SECTION 2.2 and who is a stockholder of record both on the date of giving such notice and on the record date for the determination of stockholders entitled to vote at such annual meeting; only persons thereby nominated shall be eligible to serve as directors and only business thereby proposed shall be transacted at an annual meeting. The presiding officer of the annual meeting shall determine whether a nomination or any proposal of business complies or complied with this SECTION 2.2. (b) For nominations and other business to be brought properly before an annual meeting by a stockholder pursuant to clause (ii) of paragraph (a) of this SECTION 2.2, the stockholder must deliver notice to the Secretary of the Corporation at the principal executive offices of the Corporation in accordance with this SECTION 2.2(B). The notice must be received by the Secretary not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the -------- ------- date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, the stockholder must so deliver the notice not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made; provided further, however, that in the event -------- ------- ------- that the number of directors to be elected to the Board is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least 70 days prior to the first anniversary of the preceding annual meeting, with respect to nominees for any new position created by the increase, the stockholder must so deliver the notice not later than the close of business on the tenth day following the day on which such public announcement is first made. The stockholder's notice must set forth: (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the rules and regulations thereunder (together with such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected), whether or not the Corporation is then subject to Section 14(a) and such rules and regulations; (ii) as to any other business that the stockholder proposes to transact at the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting the business at the meeting and any material interest in the business of the stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, the name and address of -2- the stockholder, as they appear on the Corporation's books, and of such beneficial owner, the class and number of shares of the Corporation that are owned beneficially and of record by such stockholder and such beneficial owner and a representation that the stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. For purposes of this SECTION 2.2 and SECTION 2.3 hereof, a "public announcement" means disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service, in a document publicly filed with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act (or their successor provisions), or in a notice of meeting or proxy statement mailed generally to the Corporation's stockholders. In giving notice under this SECTION 2.2, a stockholder must also comply with state law and the Exchange Act (and the rules and regulations thereunder). Nothing in this SECTION 2.2 shall be deemed to affect the rights of a stockholder to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 (or its successor provision) under the Exchange Act. 2.3. SPECIAL MEETINGS Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called only by the Board, the Chairman or the President or by the stockholders as set forth in the Corporation's Certificate of Incorporation (as amended and amended and restated from time to time, the "CERTIFICATE OF INCORPORATION"). Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice relating to such meeting (or to the purposes for which the meeting is called if such notice is waived or is not required as provided in the General Corporation Law of the State of Delaware (the "DELAWARE GENERAL CORPORATION LAW") or these Bylaws). In the case of a special meeting of stockholders called for the purpose of electing directors, nominations may be made only (i) by or at the direction of the Board or (ii) by any stockholder of record who delivers to the Secretary, no later than the tenth day following the day on which public announcement of the special meeting is made, a notice that complies with and is delivered in accordance with SECTION 2.2(B) above. 2.4. NOTICE OF MEETINGS Written notice of any meeting of stockholders, stating the place, date and hour of the meeting, and (if it is a special meeting) the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than 60 days before the date of the meeting (except to the extent that such notice is waived or is not required as provided in the -3- Delaware General Corporation Law or these Bylaws). Such notice shall be given in accordance with, and shall be deemed effective as set forth in, Section 222 (or any successor section) of the Delaware General Corporation Law. 2.5. WAIVERS OF NOTICE Whenever the giving of any notice is required by statute, the Certificate of Incorporation or these Bylaws, a waiver thereof, in writing and delivered to the Corporation, signed by the person or persons entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance of a stockholder at a meeting shall constitute a waiver of notice (1) of such meeting, except when the stockholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (2) (if it is a special meeting) of consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the stockholder objects to considering the matter at the beginning of the meeting. 2.6. LIST OF STOCKHOLDERS After the record date for a meeting of stockholders has been fixed, at least ten days before such meeting, the officer or other agent of the Corporation who has charge of the stock ledger of the Corporation shall make a list of all stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place in the city where the meeting is to be held, which place is to be specified in the notice of the meeting, or at the place where the meeting is to be held. Such list shall also, for the duration of the meeting, be produced and kept open to the examination of any stockholder who is present at the time and place of the meeting. 2.7. QUORUM AT MEETINGS Stockholders may take action on a matter at a meeting only if a quorum exists with respect to that matter. Except as otherwise provided by statute or by the Certificate of Incorporation, a quorum shall exist if there are present in person or represented by proxy the holders of a majority of the shares entitled to vote at the meeting. Where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes, present in person or -4- represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter. Once a share is represented for any purpose at a meeting (other than solely to object (1) to holding the meeting or transacting business at the meeting or (2) (if it is a special meeting) to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice), it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time. 2.8. VOTING AND PROXIES Unless otherwise provided in the Delaware General Corporation Law or in the Certificate of Incorporation, and subject to the other provisions of these Bylaws, each stockholder shall be entitled to one vote on each matter, in person or by proxy, for each share of the Corporation's capital stock that has voting power and that is held by such stockholder. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed appointment of proxy shall be irrevocable if the appointment form states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. 2.9. REQUIRED VOTE When a quorum is present at any meeting of stockholders, all matters shall be determined, adopted and approved by the affirmative vote (which need not be by ballot) of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote with respect to the matter, unless the proposed action is one upon which, by express provision of statutes or of the Certificate of Incorporation, a different vote is specified and required, in which case such express provision shall govern and control with respect to that vote on that matter. Where a separate vote by a class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. Notwithstanding the foregoing, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. -5- 2.10. INSPECTORS Prior to any meeting of stockholders, the Board or the President shall appoint one or more inspectors to act at such meeting and make a written report thereof and may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at the meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall ascertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting and the validity of proxies and ballots, count all votes and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons to assist them in the performance of their duties. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxy or vote, nor any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted therewith, any information provided by a stockholder who submits a proxy by telegram, cablegram or other electronic transmission from which it can be determined that the proxy was authorized by the stockholder, ballots and the regular books and records of the Corporation, and they may also consider other reliable information for the limited purposes of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons that represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for such purpose, they shall, at the time they make their certification, specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. -6- 3. DIRECTORS 3.1. POWERS The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things, subject to any limitation set forth in the Certificate of Incorporation or as otherwise may be provided in the Delaware General Corporation Law. 3.2. NUMBER AND ELECTION Within the limits set forth in the Certificate of Incorporation, the number of directors shall be determined by resolution of the Board. The directors shall be elected at the annual meeting of the stockholders in accordance with the Certificate of Incorporation. Vacancies on the Board shall be filled in accordance with the Certificate of Incorporation. Once elected or chosen pursuant to the Certificate of Incorporation, a director shall hold office until the director's successor is elected and qualified or until the director dies, resigns or is removed; provided, however, that if the Board ----------------- decreases the number of directors constituting the Board and designates a particular directorship to be eliminated due to the decrease, a director in the eliminated directorship shall cease to hold office after the next election of such directorship, unless the director is nominated and elected to another directorship on the Board. 3.3. MEETINGS 3.3.1. REGULAR MEETINGS Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board. 3.3.2. SPECIAL MEETINGS Special meetings of the Board may be called by the Chairman or President on one day's notice to each director, either personally or by telephone, express delivery service (so that the scheduled delivery date of the notice is at least one day in advance of the meeting), telegram or facsimile transmission, and on five days' notice by mail (effective upon deposit of such notice in the mail). The notice need not describe the purpose of a special meeting. -7- 3.3.3. TELEPHONE MEETINGS Members of the Board may participate in a meeting of the Board by any communication by means of which all participating directors can simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. 3.3.4. ACTION WITHOUT MEETING Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if the action is taken by all members of the Board. The action must be evidenced by one or more written consents describing the action taken, signed by each director, and delivered to the Corporation for inclusion in the minute book. 3.3.5. WAIVER OF NOTICE OF MEETING A director may waive any notice required by statute, the Certificate of Incorporation or these Bylaws before or after the date and time stated in the notice. Except as set forth below, the waiver must be in writing, signed by the director entitled to the notice, and delivered to the Corporation for inclusion in the minute book. Notwithstanding the foregoing, a director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. 3.4. QUORUM AND VOTE AT MEETINGS At all meetings of the Board, a quorum of the Board consists of a majority of the total number of directors comprising the full Board as established pursuant to SECTION 3.2 of these Bylaws. The vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these Bylaws. 3.5. COMMITTEES OF DIRECTORS The Board may designate one or more committees, each committee to consist of one or more directors. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If a member of a committee is absent -8- from any meeting, or disqualified from voting thereat, the remaining member or members present and not disqualified from voting, whether or not such member or members constitute a quorum, may, by unanimous vote, appoint another member of the Board to act at the meeting in the place of such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to approving or adopting, or recommending to the stockholders, any action or matter expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval or adopting, amending or repealing any Bylaw of the Corporation; and unless the resolution designating the committee, these Bylaws or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board, when required. Unless otherwise specified in the Board resolution appointing the Committee, all provisions of the Delaware General Corporation Law and these Bylaws relating to meetings, action without meetings, notice (and waiver thereof) and quorum and voting requirements of the Board apply, as well, to such committees and their members. 3.6. COMPENSATION OF DIRECTORS The Board shall have the authority to fix the compensation of directors. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 4. OFFICERS 4.1. POSITIONS The officers of the Corporation shall be a Chairman, a President and a Secretary, and such other officers as the Board (or an officer authorized by the Board) from time to time may appoint, including a Treasurer, one or more Vice Presidents (any of whom may be designated Senior Vice President or Executive Vice President), Assistant Secretaries and Assistant Treasurers. Each such officer shall -9- exercise such powers and perform such duties as shall be set forth below and such other powers and duties as from time to time may be specified by the Board or by any officer(s) authorized by the Board to prescribe the duties of such other officers. Any number of offices may be held by the same person, except that in no event shall the President and the Secretary be the same person. Each of the Chairman, President and/or any Vice President may execute bonds, mortgages, contracts and other instruments and documents under the seal of the Corporation, if required, except where required or permitted by law to be otherwise executed and except where the execution thereof shall be expressly delegated by the Board to some other officer or agent of the Corporation. 4.2. CHAIRMAN The Chairman shall (when present and unless otherwise provided by resolution of the Board or delegated by the Chairman) preside at all meetings of the Board and stockholders, and shall ensure that all orders and resolutions of the Board and stockholders are carried into effect. 4.3. PRESIDENT The President shall be the Chief Executive Officer of the Corporation and shall have full responsibility and authority for management of the operations of the Corporation and shall have and perform such other duties as may be prescribed by the stockholders, the Board or the Executive Committee (if any). 4.4. VICE PRESIDENT In the absence of the President or in the event of the President's inability or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. Unless the order is otherwise designated, an Executive Vice President shall come in order before any Senior Vice President and any Vice President, and a Senior Vice President shall come in order before any Vice President. 4.5. SECRETARY The Secretary shall have responsibility for preparation of minutes of meetings of the Board and of the stockholders and for authenticating records of the -10- Corporation. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board. The Secretary or an Assistant Secretary may also attest all instruments signed by any other officer of the Corporation. 4.6. ASSISTANT SECRETARY The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, perform the duties and exercise the powers of the Secretary. 4.7. TREASURER The Treasurer, if one is appointed, shall have responsibility for the custody of the corporate funds and securities and shall see to it that full and accurate accounts of receipts and disbursements are kept in books belonging to the Corporation. The Treasurer, if one is appointed, shall render to the Chairman, the President and the Board, upon request, an account of all financial transactions and of the financial condition of the Corporation. 4.8. ASSISTANT TREASURER The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, perform the duties and exercise the powers of the Treasurer. 4.9. TERM OF OFFICE The officers of the Corporation shall hold office until their successors are chosen and qualify or until their earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected or appointed by the Board may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board. -11- 4.10. COMPENSATION The compensation of officers of the Corporation shall be fixed by the Board or by any officer(s) authorized by the Board to prescribe the compensation of such other officers. 4.11. FIDELITY BONDS The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise. 5. CAPITAL STOCK 5.1. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution that some or all of any or all classes or series of the Corporation's stock be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until the certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to have a certificate (representing the number of shares registered in certificate form) signed in the name of the Corporation by the Chairman, President or any Vice President, and by the Treasurer, Secretary or any Assistant Treasurer or Assistant Secretary of the Corporation. Any or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar whose signature or facsimile signature appears on a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. 5.2. LOST CERTIFICATES The Board, Chairman, President or Secretary may direct a new certificate of stock to be issued in place of any certificate theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming that the certificate of stock has been lost, stolen or destroyed. When authorizing such issuance of a new certificate, the Board or any such officer may, as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such -12- owner's legal representative, to advertise the same in such manner as the Board or such officer shall require and/or to give the Corporation a bond or indemnity, in such sum or on such terms and conditions as the Board or such officer may direct, as indemnity against any claim that may be made against the Corporation on account of the certificate alleged to have been lost, stolen or destroyed or on account of the issuance of such new certificate or uncertificated shares. 5.3. RECORD DATE 5.3.1. ACTIONS BY STOCKHOLDERS In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 days nor less than ten days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, unless the Board fixes a new record date for the adjourned meeting. 5.3.2. PAYMENTS In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. 5.4. STOCKHOLDERS OF RECORD The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to receive notifications, to vote as such owner and to exercise all the rights and powers of an owner. The Corporation shall not be bound to recognize any equitable or other -13- claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise may be provided by the Delaware General Corporation Law. 6. INDEMNIFICATION; INSURANCE 6.1. AUTHORIZATION OF INDEMNIFICATION Each person who was or is a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether by or in the right of the Corporation or otherwise (a "PROCEEDING"), by reason of the fact that he or she is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, partner (limited or general) or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, including service with respect to an employee benefit plan, shall be (and shall be deemed to have a contractual right to be) indemnified and held harmless by the Corporation (and any successor to the Corporation by merger or otherwise) to the fullest extent authorized by, and subject to the conditions and (except as provided herein) procedures set forth in the Delaware General Corporation Law, as the same exists or may hereafter be amended (but any such amendment shall not be deemed to limit or prohibit the rights of indemnification hereunder for past acts or omissions of any such person insofar as such amendment limits or prohibits the indemnification rights that said law permitted the Corporation to provide prior to such amendment), against all expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person in connection therewith if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe such person's conduct was unlawful; provided, however, that the Corporation shall indemnify --------- ------- any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person (except for a suit or action pursuant to SECTION 6.2 hereof) only if such proceeding (or part thereof) was authorized by the Board. Persons who are not directors or officers of the Corporation and are not so serving at the request of the Corporation may be similarly indemnified in respect of such service to the extent authorized at any time by the Board. The indemnification conferred in this SECTION 6.1 also shall include the right to be paid by the Corporation (and such successor) the expenses (including attorneys' fees) incurred in the defense of or other -14- involvement in any such proceeding in advance of its final disposition; provided, however, that, if and to the extent the Delaware General Corporation - - -------- ------- Law requires, the payment of such expenses (including attorneys' fees) incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer to repay all amounts so paid in advance if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this SECTION 6.1 or otherwise; and provided further, that -------- ------- such expenses incurred by other employees and agents may be so paid in advance upon such terms and conditions, if any, as the Board deems appropriate. 6.2. RIGHT OF CLAIMANT TO BRING ACTION AGAINST THE CORPORATION If a claim under SECTION 6.1 is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring an action against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed or is otherwise not entitled to indemnification under SECTION 6.1, but the burden of proving such defense shall be on the Corporation. The failure of the Corporation to have made a determination (in the manner provided under the Delaware General Corporation Law) prior to or after the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law shall not be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Unless otherwise specified in an agreement with the claimant, an actual determination by the Corporation (in the manner provided under the Delaware General Corporation Law) after the commencement of such action that the claimant has not met such applicable standard of conduct shall not be a defense to the action, but shall create a presumption that the claimant has not met the applicable standard of conduct. -15- 6.3. NON-EXCLUSIVITY The rights to indemnification and advance payment of expenses provided by SECTION 6.1 hereof shall not be deemed exclusive of any other rights to which those seeking indemnification and advance payment of expenses may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. 6.4. SURVIVAL OF INDEMNIFICATION The indemnification and advance payment of expenses and rights thereto provided by, or granted pursuant to, SECTION 6.1 hereof shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee, partner or agent and shall inure to the benefit of the personal representatives, heirs, executors and administrators of such person. 6.5. INSURANCE The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, partner (limited or general) or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, against any liability asserted against such person or incurred by such person in any such capacity, or arising out of such person's status as such, and related expenses, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of the Delaware General Corporation Law. 7. GENERAL PROVISIONS 7.1. INSPECTION OF BOOKS AND RECORDS Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or -16- other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office or at its principal place of business. 7.2. DIVIDENDS The Board may declare dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation and the laws of the State of Delaware. 7.3. RESERVES The directors of the Corporation may set apart, out of the funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and may abolish any such reserve. 7.4. EXECUTION OF INSTRUMENTS All checks, drafts or other orders for the payment of money and promissory notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board may from time to time designate. 7.5. FISCAL YEAR The fiscal year of the Corporation shall be fixed by resolution of the Board. 7.6. SEAL The corporate seal shall be in such form as the Board shall approve. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. * * * * -17- EX-9.1 4 EXHIBIT 9.1 EXHIBIT 9.1 SHAREHOLDERS AGREEMENT ---------------------- THIS AGREEMENT is made as of April 23, 1997 by and among AnswerThink Consulting Group, Inc. a Florida corporation (the "COMPANY")and the shareholders of the Company from time to time a party hereto, initially including, Golder, Thoma, Cressey, Rauner Fund V, L.P., a Delaware limited partnership ("GTCR V"), MG Capital Partners II, L.P. ("MG") a Delaware limited partnership, Gator Associates, Ltd., a Florida limited partnership ("GATOR"), and Tara Ventures, Ltd., a British Virgin Islands corporation ("TARA" and together with Gator, the "MILLER GROUP") and each of the individuals listed on the signature page hereof under the heading, "EXECUTIVES" (such individuals being referred to individually as an "Executive" and collectively, the "EXECUTIVES"). Each of the shareholders of the Company from time to time a party hereto are collectively referred to herein as the "Shareholders" and individually as a "Shareholder." Capitalized terms used but not otherwise defined herein are defined in Section 5 hereof. Each of GTCR V, MG and the Miller Group will purchase shares of the Company's Class A Convertible Preferred Stock (the "CLASS A PREFERRED"), pursuant to a purchase agreement between GTCR V, MG, the Miller Group and the Company dated as of the date hereof (the "PURCHASE AGREEMENT"). Certain of the Executives will purchase shares of Common Stock and, at their option, Class A Preferred pursuant to a senior management agreement between the Company and each Executive dated as of the date hereof (the "Senior Management Agreement"). The execution and delivery of this Agreement is a condition to the purchase of Class A Preferred by each of GTCR V, MG and the Miller Group pursuant to the Purchase Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: 1. BOARD OF DIRECTORS. ------------------ (a) From and after the Closing and until the provisions of this Section 1 cease to be effective, each Shareholder shall vote all of his Shareholder Shares and any other voting securities of the Company over which such Shareholder has voting control and shall take all other necessary or desirable actions within his control (whether in his capacity as a shareholder, director, member of a board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary and desirable actions within its control (including, without limitation, calling special board and shareholder meetings), so that: (i) the authorized number of directors on the Company's board of directors (the "BOARD") shall be established at eleven directors; -1- (ii) the following persons shall be elected to the Board: (A) up to two representatives designated by GTCR V (the "INVESTOR DIRECTORS"), who shall initially be Bruce V. Rauner and Will Kessinger; (B) up to two representatives designated by Shareholders holding a majority of the Miller Group Shareholder Shares (the "MILLER DIRECTORS"), one of such representatives shall initially be Edmund R. Miller (the "INITIAL SPECIFIED MILLER DIRECTOR"); (C) up to three of the Company's executive officers (the "EXECUTIVE DIRECTORS"), who shall initially be Ted A. Fernandez, Allan R. Frank and Ulysses S. Knotts, III and shall thereafter be chosen by the holders of Shareholder Shares holding a majority of the Executive Shareholder Shares; and (D) up to four representatives designated by the Investor Directors and the Initial Specified Miller Director by unanimous vote, not to be unreasonably withheld, from representatives chosen by the Investor Directors and the Initial Specified Miller Director by majority vote, in each case after consultation with the Executive Directors (the "OUTSIDE DIRECTORS"); provided that such Outside Directors shall not be a member of the Company's management or an employee or officer of the Company or its subsidiaries or otherwise affiliated with the Company, the Executive Directors or any of the Investors; and provided further that if the Investor Directors and the Initial Specified Miller Director are unable to unanimously agree on any of the Outside Directors within 10 days after the date of notification by the Investor Directors of its proposed nominees, any such Outside Director as to which there is disagreement shall be designated by a representative (the "Joint Representative") as selected by the unanimous agreement of the Investor Directors and the Initial Specified Miller Director (or if unanimous agreement is not obtained within 5 days after trying to reach agreement, as selected by a representative designated by the Investor Directors (the "INVESTOR REPRESENTATIVE") and a representative designated by the Initial Specified Miller Director (the "MILLER REPRESENTATIVE")). In each case, the Joint Representative, the Investor Representative and the Miller Representative shall not be a member of the Company's management or an employee or officer of the Company or its subsidiaries or otherwise affiliated with the Company, the Executive Directors or any of the Investors; -2- (iii) the removal from the Board of any Investor Director, any Executive Director, any Miller Director or any Outside Director shall be only upon the written request of the person or persons entitled to designate such director pursuant to Section 1(a)(ii) above at the time of such designation; provided that if any Executive Director ceases to be an employee of the Company and its subsidiaries, he shall be removed as a director promptly after his employment ceases on a date specified by the Investor Directors; provided further that the removal of any Outside Director shall be by the majority vote of the persons entitled to designate such director pursuant to Section l(a)(ii)(D) (without giving effect to the provisions thereof); and provided further that at such time that any person or persons are no longer entitled to designate one or more representatives pursuant to subparagraph (ii) above, the parties shall take all necessary actions so that each member of the Board or any committee thereof, designated by such person or persons shall be automatically removed as (and shall cease to be) a director of the Company and a director of each of the Company's subsidiaries and a member of each such committee; (iv) in the event that any director designated hereunder for any reason ceases to serve as a member of the Board during his term of office, the resulting vacancy on the Board shall be filled by a representative designated by the person or persons entitled to designate such director pursuant to Section 1 (a)(ii) above at the time of such designation if such person so elects; (v) except as otherwise provided in Sections l(a)(iii) and l(a)(iv) above, any vacancy on the Board shall not be filled and for so long as such vacancy exists, the authorized number of directors on the Board shall be reduced accordingly. (b) There shall be at least four meetings of the Board during every fiscal year, at least one of which shall be held in each 120-day period during the Company's fiscal year. The Company shall pay all out-of-pocket expenses incurred by each director in connection with attending regular and special meetings of the Board and any committee thereof. (c) If any party fails (but is otherwise entitled) to designate a representative to fill a directorship pursuant to the terms of this Section 1, the election of a person to such directorship shall be accomplished in accordance with the Company's by-laws and applicable law; provided that the parties shall take all necessary actions to remove such individual if the party or parties which failed (and are otherwise entitled) to designate such a representative so directs. 2. CONFLICTING AGREEMENTS. Each Shareholder represents that he has not ---------------------- granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement, and no holder of -3- Shareholder Shares shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement. 3. LEGEND. Each certificate evidencing Shareholder Shares and each ------ certificate issued in exchange for or upon the transfer of any Shareholder Shares (if such shares remain Shareholder Shares as defined herein after such transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form: "The securities represented by this certificate are subject to a Shareholders Agreement dated as of April 23, 1997, among the issuer of such securities (the "Company") and certain of the Company's shareholders. A copy of such Shareholders Agreement will be furnished without charge by the Company to the holder hereof upon written request." The Company shall imprint such legend on certificates evidencing Shareholder Shares outstanding prior to the date hereof The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Shareholder Shares. 4. SALE OF THE COMPANY. ------------------- (a) If the Board approves a Sale of the Company (an "Approved Sale"), each holder of Shareholder Shares shall vote for, consent to and raise no objections against such Approved Sale. If the Approved Sale is structured as a (i) merger or consolidation, each holder of Shareholder Shares shall waive any dissenters' rights, appraisal rights or similar rights in connection with such merger or consolidation or (ii) sale of stock, each holder of Shareholder Shares shall agree to sell all of his Shareholder Shares and rights to acquire Shareholder Shares on the terms and conditions approved by the Board. Each holder of Shareholder Shares shall take all necessary or desirable actions in connection with the consummation of the Approved Sale as requested by the Board. (b) Prior to commencing any such significant action in connection with seeking a Sale of the Company, the Company will provide members of the Executive Group which are then employees of the Company a notice setting forth the Company's intention to seek a proposed Sale of the Company (the "SALE NOTICE"). Within 45 days following receipt of the Sale Notice, members of the Executive Group who are then employees of the Company and that hold a majority of the Shareholder Shares held by all such members may deliver a written offer (a "Management Offer") to the Company to effectuate a Sale of the Company to one or more such members of the Management Group or a Person controlled by one or more of them (a "MANAGEMENT TRANSACTION") setting forth in reasonable detail the terms, conditions and proposed purchase price of such Management Transaction, which price shall be payable solely in cash upon the consummation of such Transaction. If the terms and conditions of such Management Transaction are acceptable to the Board, then -4- the Board will seek to consummate such Management Transaction, subject to the conditions set forth in subparagraph (c) below. If a Management Offer is delivered and the terms and conditions of the Management Transaction are not acceptable to the Board, then the Board may seek to effectuate a Sale of the Company on terms and conditions satisfactory to the Board; provided that if the Board determines to effectuate a Sale of the Company that would not result in the holders of Shareholder Shares receiving aggregate net cash consideration (after payment of any taxes payable by the Company and if a sale of assets, any liabilities retained by the Company in connection with such Sale of the Company) in excess of 100% of the aggregate net cash consideration which the holders of Shareholder Shares would have received (after payment of any taxes payable by the Company and, if a sale of assets, any liabilities retained by the Company in connection with such Sale of the Company) if the Management Transaction were consummated on terms set forth in the Management Offer, then the Company shall deliver a second notice (the "SECOND SALE NOTICE") to members of the Executive Group which are employees of the Company or any of its Subsidiaries describing in reasonable detail the terms and conditions of the Sale of the Company proposed to be effected, and the members of such Executive Group entitled to deliver a Management Offer will have 20 days from the receipt of the Second Sale Notice to deliver a written offer (the "SECOND OFFER NOTICE") to the Company to effect the Management Transaction on the terms described in the Management Offer, subject to the conditions set forth in subparagraph (c) below. (c) If members of the Executive Group deliver a Management Offer or a Second Offer Notice, such members must (A) obtain an executed definitive and binding agreement to consummate the Management Transaction and obtain and deliver to the Company binding commitments regarding the financing thereof which are reasonably satisfactory to the Board within 45 days after acceptance by the Board of the Management Offer or Second Offer Notice, as applicable, and (B) consummate the Management Transaction within 90 days after acceptance by the Board of the Management Offer or the Second Management Offer, as applicable. If any of the conditions set forth in (A) or (B) of the preceding sentence is not fulfilled, the Board may again seek a Sale of the Company and members of the Executive Group will not have the right to deliver a Management Offer or a Second Offer Notice in connection with any Sale of the Company. (d) In connection with any Approved Sale (whether by sale, merger, recapitalization, reorganization, consolidation, combination or otherwise) pursuant to this Section 4, each holder of Shareholder Shares immediately prior to such Approved Sale shall, subject to clause (e) below, receive the same form of consideration and the same portion of the aggregate consideration that such holder of Shareholder Shares would have received if the aggregate consideration paid by the buyer in connection with such Approved Sale (the "AGGREGATE CONSIDERATION") had been paid directly to the Company and then distributed by the Company in a complete liquidation pursuant to the terms of the Company's Certificate of Incorporation as in effect immediately prior to such Approved Sale (but without the Company paying any amounts in such liquidation with respect to any obligations that are being assumed by the buyer in connection with such Approved Sale, and after giving effect to any transfer taxes payable in connection with such Approved Sale, the amount of which will be paid directly to the persons owing such taxes). In furtherance thereof, but without prejudice to any rights granted in the Company's Certificate of Incorporation, each holder of then currently exercisable tights to acquire any class of Shareholder Shares will be given an opportunity to -5- either (A) exercise such rights prior to the consummation of such Approved Sale and participate in such sale as a holder of such class of Shareholder Shares or (B) upon the consummation of such Approved Sale, or at such other time agreed to by such holder, receive in exchange for (or, if applicable, upon the exercise of) such rights, the consideration contemplated to be received by such holder as a result of such Approved Sale in the agreement or instrument pursuant to which such holder acquired such rights from the Company or, if no such consideration is contemplated thereby, the consideration such holder would have received if such holder exercised such rights prior to the consummation of such Approved Sale less the amount such holder would have paid to the Company to exercise such rights. Each holder of Shareholder Shares shall take all necessary or desirable actions in connection with the receipt of the Aggregate Consideration from such Approved Sale as is requested by the Board to effectuate the foregoing. (e) If one or more holders of Shareholder Shares continue to hold Shareholder Shares following an Approved Sale (the "REMAINING SECURITYHOLDERS"), then (i) the Remaining Securityholders shall not be entitled to receive any distribution in respect of such Shareholder Shares pursuant to Section 4(d) and (ii) for purposes of determining the consideration which each holder of Shareholder Shares is entitled to receive pursuant to Section 4(d), it shall be assumed that none of the Shareholder Shares held by the Remaining Securityholders are outstanding. 5. DEFINITIONS. ----------- "ADDITIONAL EXECUTIVE" means any member of the Company's senior management who becomes a "Shareholder" in accordance with Section 7 of this Agreement. "CLOSING" shall have the meaning set forth in the Purchase Agreement. "EXECUTIVE GROUP" means the Executive and the Additional Executives. "EXECUTIVE SHAREHOLDER SHARES" means Shareholder Shares held by an Executive (other than Edmund R. Miller) or an Additional Executive. "INVESTORS" mean GTCR V, MG, the Miller Group and each of their successors, and to the extent permitted to be a subsequent holder of Convertible Preferred pursuant to the Purchase Agreement, assigns. "MILLER GROUP SHAREHOLDER SHARES" means Shareholder Shares held by members of the Miller Group. "PERSON" means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization end a governmental entity or any department, agency or political subdivision thereof. -6- "PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock approved by the Board. "SALE OF THE COMPANY" means any transaction or series of transactions pursuant to which any person(s) or entity(ies) other than an Investor in the aggregate acquire(s) (i) all or substantially all of the capital stock of the Company or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SHAREHOLDER SHARES" means (i) any Common Stock purchased or otherwise acquired by any Shareholder, (ii) any equity securities issued or issuable directly or indirectly with respect to the Common Stock referred to in clause (i) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iii) any other shares of any class or series of capital stock of the Company held by a Shareholder. As to any particular shares constituting Shareholder Shares, such shares will cease to be Shareholder Shares when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (y) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or any similar provision then in force) under the Securities Act. 6. TRANSFERS: TRANSFERS IN VIOLATION OF AGREEMENT. Prior to ---------------------------------------------- transferring any Shareholder Shares to any person or entity, the transferring Shareholder shall cause the prospective transferee to execute and deliver to the Company and the other Shareholders a counterpart of this Agreement. Any transfer or attempted transfer of any Shareholder Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such transfer on its books or treat any purported transferee of such Shareholder Shares as the owner of such shares for any purpose. 7. ADDITIONAL SHAREHOLDERS. In connection with the issuance of any ----------------------- additional equity securities of the Company, the Company may permit such person to become a party to this Agreement and succeed to all of the rights and obligations of a "Shareholder" under this Agreement by obtaining an executed counterpart signature page to this Agreement, and, upon such execution, such person shall for all purposes be a "Shareholder" party to this Agreement. 8. HOLDBACK AGREEMENT. Each holder of Shareholder Shares shall not ------------------ effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180-day period beginning on the effective date of an initial Public Offering, unless the underwriters managing such initial Public Offering otherwise agree. -7- 9. AMENDMENT AND WAIVER. Except as otherwise provided herein, no -------------------- modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or the Shareholders unless such modification, amendment or waiver is approved in writing by the Company, the Investors, the Executives and each Additional Executive. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. 10. SEVERABILITY. Whenever possible, each provision of this Agreement ------------ shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 11. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, ---------------- this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 12. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this ---------------------- Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and permitted assigns and the Shareholders and any permitted subsequent holders of Shareholder Shares and the respective successors and permitted assigns of each of them, so long as they hold Shareholder Shares. 13. COUNTERPARTS. This Agreement may be executed in separate ------------ counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 14. REMEDIES. The Company, the Investors, the Executives and each -------- Additional Executive shall be entitled to enforce their rights under this Agreement specifically to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that the Company, the Investors, the Executives and each Additional Executive may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. 15. NOTICES. All notices, demands or other communications to be given ------- or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient -8- by reputable overnight courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the Investor and to each Executive at the addresses indicated on the Schedule of Holders and to the Company at the address of its corporate headquarters or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 16. GOVERNING LAW. The corporate law of Florida shall govern all ------------- issues concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or other conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction)that would cause the application of the laws of any jurisdiction other than the State of Illinois. 17. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement -------------------- are inserted for convenience only and do not constitute a part of this Agreement. 18. NO INDIRECT TRANSFERS. Each holder of Shareholder Shares that is --------------------- not an individual (other than GTCR V) shall not permit the issuance of additional equity interests in such holder or any transfer of any interest of any Indirect Owner in such holder without the consent of both Investors. 19. MANAGEMENT CLASS A PREFERRED. The Company may sell up to an ---------------------------- aggregate of 400,000 shares of Class A Preferred to the Executives and other employees of the Company (including shares of Class A Preferred to be purchased under Senior Management Agreements), as determined by the President. 20. REINCORPORATION INTO DELAWARE. If any Investor reasonably ----------------------------- determines that in order to more fully effectuate the terms and provisions of the Purchase Agreement, this Agreement and the other agreements and documents contemplated hereby and thereby it would be necessary or desirable to reincorporate into Delaware, the parties hereto hereby agree to take all such action as are reasonably requested by such Investor to so reincorporate. [THIS SPACE INTENTIONALLY LEFT BLANK] -9- IN WITNESS WHEREOF, the parties hereto have executed this Shareholders Agreement on the day and year first above written. ANSWERTHINK CONSULTING GROUP, INC. By: /s/ Ted A. Fernandez ----------------------------------- Its: CEO ---------------------------------- GATOR ASSOCIATES, LTD. By: /s/ Edmund R. Miller ------------------------------------ Its: ----------------------------------- TARA VENTURES, LTD. By: /s/ Edmund R. Miller ------------------------------------ Its: ----------------------------------- -10- GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P. By: GTCR V, L.P. Its: General Partner By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce Rauner ----------------------------------- Its: Principal EXECUTIVES /s/ Ted A. Fernandez -------------------------------------- Ted A. Fernandez /s/ Allan R. Frank -------------------------------------- Allan R. Frank /s/ Ulysses S. Knotts, III -------------------------------------- Ulysses S. Knotts, III /s/ Edmund R. Miller -------------------------------------- Edmund R. Miller -11- ADDITIONAL INVESTORS MG CAPITAL PARTNERS II, L.P. By: MG Capital Corp. -------------------------------------- Its: General Partner ------------------------------------- By: [SIGNATURE APPEARS HERE] -------------------------------------- Its: Managing Director ------------------------------------- -12- SCHEDULE OF HOLDERS ------------------- If to GTCR V: Golder, Thoma, Cressey, Rauner Fund V, L.P. 6100 Sears Tower Chicago, Illinois 60606-6402 Attention: Bruce V. Rauner with a copy to: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich If to MG: MG Capital Partners II, L.P. 227 West Monroe Street, Suite 4950 Chicago, Illinois 60606 If to the Miller Group: Gator Associates, Ltd. Tara Ventures, Ltd. c/o Miller Capital Management, Inc. 2665 South Bayshore Drive, Suite 1101 Coconut Grove, FL 33133 Attention: Edmund R. Miller Ted A. Fernandez 660 Warren Lane Key Biscayne, FL 33149 Allan R. Frank 805 Roscommon Road Bryn Mawr, PA 19010 Ulysses S. Knotts, III 470 Montwicke Chase Atlanta, GA 30327 -13- Edmund R. Miller 2000 South Bayshore Drive Unit 40 Coconut Grove, FL 33133 -14- IN WITNESS WHEREOF, the undersigned individuals hereby agree to become parties to this Shareholders Agreement pursuant to Section 7 of said agreement as of the 1st day of August, 1997. /s/ Marvin Botnick -------------------------------------- Marvin Botnick /s/ Scott N. Smith, Pursuant to Power of Attorney -------------------------------------- John Dean /s/ James L. Grebe -------------------------------------- James L. Grebe /s/ Fred R. Herbert -------------------------------------- Fred R. Herbert /s/ Robert E. Jordan -------------------------------------- Robert E. Jordan /s/ Scott N. Smith, Pursuant to Power of Attorney -------------------------------------- John Shlesinger /s/ Scott N. Smith -------------------------------------- Scott N. Smith /s/ Louis B. Todd -------------------------------------- Louis B. Todd -15- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of October 12, 1997. /s/ David A. J. Axson --------------------------------------- [Sign Name] David A. J. Axson --------------------------------------- [Print Name] -16- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of October 12, 1997. /s/ Elizabeth E. Brumbaugh --------------------------------------- [Sign Name] Elizabeth E. Brumbaugh --------------------------------------- [Print Name] -17- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of October 12, 1997. /s/ Christine Ann Gattenio --------------------------------------- [Sign Name] Christine Ann Gattenio --------------------------------------- [Print Name] -18- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of October 12, 1997. /s/ Mark Alan Krueger --------------------------------------- [Sign Name] Mark Alan Krueger --------------------------------------- [Print Name] -19- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of October 12, 1997. /s/ Neil A. Lazar --------------------------------------- [Sign Name] Neil A. Lazar --------------------------------------- [Print Name] -20- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of October 11, 1997. /s/ Jeffrey Scott Rosengard --------------------------------------- [Sign Name] Jeffrey Scott Rosengard --------------------------------------- [Print Name] -21- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. The undersigned is deemed an Additional Executive and a holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of October 13th, 1997. /s/ Gregory P. Hackett --------------------------------------- Gregory P. Hackett -22- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of November 12, 1997. /s/ Robin M. Potter --------------------------------------- Robin M. Potter -23- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of November 12, 1997. /s/ Beth E. Stanley --------------------------------------- Beth E. Stanley -24- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of November 12, 1997. /s/ Kevin J. Barnes --------------------------------------- [Sign Name] Kevin J. Barnes --------------------------------------- [Print Name] -25- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of November 12, 1997. /s/ Robert L. Brown --------------------------------------- [Sign Name] Robert L. Brown --------------------------------------- [Print Name] -26- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of November 12, 1997. /s/ Barbara Dockrill --------------------------------------- [Sign Name] Barbara Dockrill --------------------------------------- [Print Name] -27- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of November 12, 1997. /s/ Robert T. Gursky --------------------------------------- [Sign Name] Robert T. Gursky --------------------------------------- [Print Name] -28- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of November 12, 1997. /s/ Jeffrey S. Malkin --------------------------------------- [Sign Name] Jeffrey S. Malkin --------------------------------------- [Print Name] -29- AGREEMENT TO BECOME PARTY TO SHAREHOLDERS AGREEMENT In connection with the entering into of an employment agreement with ANSWERTHINK CONSULTING GROUP, INC., a Florida corporation ("AnswerThink"), the undersigned hereby agrees to become party to and to succeed to all of the rights and obligations of a "Shareholder" under that certain Shareholders Agreement dated April 23, 1997 among AnswerThink, Golder, Thoma, Cressey, Rauner Fund V, L.P., MG Capital Partners, II, L.P., Gator Associates, Ltd. and Tara Ventures, Ltd. However, the undersigned hereby acknowledges that the undersigned is neither an Additional Executive nor the holder of Executive Shareholder Shares as such terms are defined in the Shareholders Agreement. This Agreement shall act as the "executed counterpart signature page" referred to in Section 7 of the Shareholders Agreement. Executed as of November 12, 1997. /s/ George Redfern --------------------------------------- [Sign Name] George Redfern --------------------------------------- [Print Name] -30- EX-9.2 5 EXHIBIT 9.2 Exhibit 9.2 AMENDMENT NO. 1 TO SHAREHOLDERS AGREEMENT THIS AMENDMENT entered into this 24 day of February, 1998, to the SHAREHOLDERS AGREEMENT (the "Agreement"), dated as of the 23rd day of April, 1997 by and among AnswerThink Consulting Group, Inc., a Florida corporation (the "Company"), and the shareholders of the Company from time to time a party hereto, initially including, Golder, Thoma, Cressey, Rauner Fund V, L.P., a Delaware limited partnership ("GTCRV"), MG Capital Partners II, L.P., a Delaware Limited partnership ("MG"), Gator Associates, Ltd., a Florida limited partnership ("Gator"), and Tara Ventures, Ltd., a British Virgin Islands corporation ("Tara") and each of the individuals listed on the signature page therein under the heading, "Executives." Pursuant to the Agreement, the Executives and other employees of the Company had the right to receive 400,000 shares of Class A Preferred Stock. Management of the Company has agreed to assign 200,000 shares of the Class A Preferred Stock to Golder, Thoma, Cressey, Rauner Fund V, L.P., GTCR Associates V, Miller Capital Management, Inc. and each investor in Gator and Tara who elects to exercise his/her/its preemptive rights. WITNESSETH ---------- WHEREAS, the Parties desire to amend the Agreement as hereinafter set forth; NOW, THEREFORE, the Parties hereby agree as follows: 1. SECTION 19 of the Agreement shall be deleted in its entirety and new Section 19 shall be substituted therefore as follows: Additional Class A Preferred. The Company may sell up to an ---------------------------- aggregate of (i) 200,000 shares of Class A Preferred to the Executives and other employees of the Company (including shares of Class A Preferred to be purchased under Senior Management Agreements), as determined by the President and (ii) an aggregate of 100,000 shares of Class A Preferred to GTCRV, GTCR Associates V and MG and (iii) an aggregate of 100,000 shares of Class A Preferred to Miller Capital Management, Inc. and each investor in Gator and Tara who elects to exercise his/her/its preemptive rights. Each of the parties hereby waives any and all rights that may arise in connection with such issuance. 2. Except as expressly amended thereby, the Agreement remains in full force and effect. 3. This Amendment shall become effective as of the date hereof in accordance with Section 9 of the Agreement. # # # IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. ANSWERTHINK CONSULTING GROUP, INC. By: /s/ Ted A. Fernandez ------------------------------------- Name: Title: GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P. By: GTCR V, L.P. Its: General Partner By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: [SIGNATURE APPEARS HERE] ------------------------------------- a Principal GTCR ASSOCIATES V By: Goulder, Thoma, Cressey, Rauner, Inc. Its: Managing General Partner By: [SIGNATURE APPEARS HERE] ------------------------------------- a Principal MG CAPITAL PARTNERS, II, L.P. By: [SIGNATURE APPEARS HERE] ------------------------------------- Its: ------------------------------------ 2 EXECUTIVES /s/ Ted A. Fernandez --------------------------------- Ted A. Fernandez /s/ Allan R. Frank --------------------------------- Allan R. Frank /s/ Ulysses S. Knotts, III --------------------------------- Ulysses S. Knotts, III /s/ Edmund R. Miller --------------------------------- Edmund R. Miller 3 /s/ Edmund R. Miller -------------------------------- Edmund R. Miller, pursuant to Waiver of Preemptive Rights, Authorization and Acknowledgement dated February 24, 1998 for the following shareholders: George E. Miller, Southeast Investments, L.P., Southeast Investments International Ltd., Carmen Howell, Steve Eber, Bank Morgan Stanley AG, AB Hannells Industrier, BFC Holdings, Inc., Lighthouse Partners USA, L.P., Family Trust of Nathan A. Low, Erinch R. Ozada, A. Markman Peters, Jenny R. Peters, Pippa J. Ellis, Joseph Salvani, Theodore Gelman, Alain Oihayon, Robert I. Rafford, Jr., Priscilla Cooney, James Askew, Pamela Askew, Rock Creek Partners, L.P., Atlantic Balanced Fund, Holtermann Corporation, Fernando Montero, Cecelia Montero, George G. Guthrie, Alex Fernandez, Berta T. Fernandez, Aurelio E. Fernandez, Mercedes San Miguel, Luis San Miguel, Leonardo F. Brito, Juan Carlos Campuzano, Mayra R. Campuzano, Brian Pfeifler, Southhampton, Ltd., Mark Drier, and Pharos Fund Limited, Delaware Charter Guarantee & Trust Co. TTEE FBO S. Daniel Ponce, Alan Penn, Roberta Penn, Bernard Frank, Muriel I. Frank, Theodore Gelman, Rev. Trust, Theodore D. Gelman, Ellen Gelman, TTEES, UDA 8/5/93, Ana Azcuy, Bonni Harris Custodian for Jason Ross Harris UGTMA/FL, Bonni Harris, Custodian for Nikki Lee Harris UGTMA/FL, Bonni Gelman Harris, Mila Ann Gelman, Karen Gelman, Duff Gelman, Custodian for Devra Leya Gelman, UGTMA/FL, Duff Gelman, Custodian for Ellen Behla Gelman, UGTMA/FL, Duff Gelman, Custodian for Jude Gelman, UGTMA/FL, Duff Adam Gelman, Mila Gelman-Johnson, Custodian for Spencer Gelman Johnson UTGMA/CA, Donnell S. Guthrie, George Gordon Guthrie, Jr., Christina Donnel Guthrie, Elizabeth Stanton Guthrie, James D. Askew, Custodian for Amanda F. Askew, UALUGTMA, Marisa E. Askew EX-9.4 6 EXHIBIT 9.4 EXHIBIT 9.4 FORM OF RESTRICTED SECURITIES AGREEMENT --------------------------------------- THIS AGREEMENT is made as of April 23, 1997, among Golder, Thoma, Cressey, Rauner Fund V, L.P., a Delaware limited partnership ("GTCR V"), Gator Associates, Ltd., a Florida limited partnership ("GATOR"), MG Capital Partners II, L.P. ("MG"), a Delaware limited partnership, and Tara Ventures, Ltd., a British Virgin Islands corporation ("TARA" and together with Gator, the "MILLER GROUP") and the individual listed on the signature page hereof under the heading "Executive". In order to induce the Investors to enter that certain Purchase Agreement among AnswerThink Consulting Group, Inc., a Florida corporation (the "COMPANY"), GTCR V, MG, Gator and Tara dated as of the date hereof (as amended from time to time, the "PURCHASE AGREEMENT") and the agreements contemplated thereby, Executive and the Investors desire to enter into an agreement pursuant to which, subject to the terms and conditions contained herein, the Investors will acquire from the Executive up to [NUMBER OF SHARES APPEARS HERE] shares of Common Stock, par value $.01 per share (the "COMMON STOCK") of the Company. Certain definitions are set forth in Section 4 of this Agreement. The parties hereto, intending to be legally bound, hereby agree as follows: 1. VESTING OF RESTRICTED SHARES. Restricted Shares will become ---------------------------- vested upon a Sale of the Company or following a Public Offering in accordance with this Section 1. (a) If a Sale of the Company occurs on or prior to the sixth anniversary of the date of this Agreement, then a number of Restricted Shares will become vested (whether then held by Executive or an Investor) immediately prior to such Sale of the Company in accordance with the following schedule based on (i) the date of such Sale of the Company and (ii) the Target Multiple after giving effect to such Sale of the Company and assuming that the Investors own no Restricted Shares or Other Restricted Shares:
DATE OF A SALE TARGET MULTIPLE VESTED UNVESTED OF THE COMPANY ACHIEVED SHARES SHARES -------------- -------- ------ ------ On or prior to the Second 10 or greater 300,000 0 Anniversary of this 6 2/3 but less than 10 200,000 100,000 Agreement 3 1/3 but less than 6 2/3 100,000 200,000 less than 3/13 0 300,000 Between the Second and Fourth 10 or greater 300,000 0 Anniversary of this 6 2/3 but less than 10 200,000 100,000 Agreement less than 6 2/3 0 300,000 Between the Fourth and Sixth Anniversary of this 10 or greater 300,000 0 Agreement less than 10 0 300,000
(b) Following a Public Offering, all of the Restricted Shares will vest on the first date (the "VESTING DATE") that the average of the Trading Prices of a share of the Common Stock on each of the 30 consecutive trading days immediately preceding such date exceeds the Target Price. (c) Restricted Shares which have become vested pursuant to subsection (a) or (b) above on or prior to the earlier of (i) immediately prior to a Sale of the Company or (ii) the sixth anniversary of the date of this Agreement (such earlier date being hereinafter referred to as the "DETERMINATION DATE") are referred to herein as "VESTED SHARES," and all other Restricted Shares are referred to herein as "Unvested Shares." 2. TRANSFER OF RESTRICTED SHARES. ----------------------------- (a) On the earlier of (i) the date that Executive ceases to be employed by any of the Company and its Subsidiaries for any reason (the "TERMINATION") or (ii) the Determination Date, Executive shall be deemed to have transferred to the Investors for no consideration all Restricted Shares that are then Unvested Shares and the Investors shall be deemed to have accepted such transfer and good and marketable title in such shares shall become vested in the Investors. Such Unvested Shares shall be allocated among the Investors pro rata based upon the number of shares of Underlying Common Stock then owned by each such Investor. (b) If Termination occurs prior to both the Determination Date and the Vesting Date, then (i) on the Determination Date (if earlier than the Vesting Date), each Investor shall be deemed to have contributed to the Company all of the Vested Shares, if any, then held by such Investor and (ii) on the Vesting Date (if earlier than the Determination Date), each Investor shall be deemed to have contributed to the Company all Restricted Shares held by it as of immediately after the Vesting Date. For purposes of clause (i), Restricted Shares Transferred to the Investors upon the Termination shall vest in the hands of the Investors pro rata based on the number of Restricted Shares Transferred to each Investor upon the Termination pursuant to Section 2(a). 3. RESTRICTIONS. Executive may not Transfer any interest in any ------------ Restricted Shares except in accordance with the Senior Management Agreement. If the Investors receive Restricted Shares which they may be obligated to contribute to the Company in accordance with Section 2(b), no Investor shall Transfer any Restricted Shares so long as such Investor may be obligated to so contribute Restricted Shares. 4. DEFINITIONS. ----------- "AFFILIATE" of any Investor means any direct or indirect general or limited partner of such Investor, or any employee or owner thereof, or any other person, entity or investment fund controlling, controlled by or under common control with such Investor, and will include, without limitation, with respect to GTCR V, Golder, Thoma, Cressey, Rauner, Inc. and its owners and employees. -2- "CASH INFLOWS" means, on any date, the sum of all cash, cash equivalents, promissory obligations and the fair market value of other property made by the Investors from and after the date of this Agreement with respect to or in exchange for Investor Stock on or prior to such date. "CASH OUTFLOWS" means, on any date, the sum of all cash payments and the fair market value of all other distributions made by the Company from and after the date of this Agreement with respect to or in exchange for Investor Stock on or prior to such date, and, including, in the case of a Sale of the Company expected to occur within five business days after such date, all cash payments to be received by the Investors with respect to or in exchange for Investor Stock after giving effect to the consummation of a Sale of the Company; provided that in the event that property is distributed subject to contingencies or restrictions that might affect its fair market value (e.g., non-publicly traded stock, publicly traded stock subject to restrictions or limitations or a right to receive future consideration pursuant to an earn out), such distribution shall not be considered a "CASH OUTFLOW". (and the fair market value of such distribution shall not be determined) until such distributed property is first sold by an Investor (i) in an underwritten public offering of securities or (ii) to any person (other than the Company) who is not an Affiliate of any Investor or the Company. Notwithstanding the foregoing, the following shall not be considered a distribution: (a) any redemption or repurchase by the Company of any securities pursuant to an employment agreement, (b) any recapitalization or exchange of securities of the Company and (c) any subdivision (by stock split or otherwise) or any combination (by reverse stock split or otherwise) of any outstanding stock. "INVESTORS" mean GTCR V, the Miller Group, MG and each of their successors, and to the extent permitted to be a subsequent holder of Convertible Preferred pursuant to the Purchase Agreement, assigns. "INVESTOR STOCK" shall have the meaning set forth in the Purchase Agreement. "OTHER RESTRICTED SHARES" means any shares of Common Stock (as appropriately adjusted to reflect stock splits, stock dividends, combinations of shares and other recapitalizations) subject to a Restricted Securities Agreement substantially similar to this Agreement. "PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock approved by the board of directors of the Company. "RESTRICTED SHARES" means 300,000 of the 700,000 shares of Common Stock acquired by Executive under the Senior Management Agreement, as appropriately adjusted to reflect stock splits, stock dividends, combinations of shares and other recapitalizations. -3- "SALE OF THE COMPANY" means any transaction or series of transactions pursuant to which any person(s) or entity(ies) other than an Investor and its Affiliates in the aggregate acquire(s) (i) capital stock of the Company possessing the voting power (other than voting rights accruing only in the event of a default, breach or event of noncompliance) to elect a majority of the Company's board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company's capital stock, shareholder or voting agreement, proxy, power of attorney or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis; provided that the term "Sale of the Company" shall not include any sale of equity or debt securities by the Company in a private or public offering to other investors selected by GTCR V. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SENIOR MANAGEMENT AGREEMENT" means the Senior Management Agreement dated as of the date hereof between the Executive and the Company, as amended from time to time. "SHAREHOLDERS AGREEMENT" means the Shareholders Agreement dated as of the date hereof among the Executive, the Investors, certain other individuals and the Company, as amended from time to time. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. "TARGET MULTIPLE" means Cash Outflows divided by Cash Inflows. "TARGET PRICE" means S30.00 per share of Common Stock (as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). "TRADING PRICE" of a share of Common Stock means, on any trading day, the closing sale price on the principal securities exchange on which shares of Common Stock are then listed, or, if there have been no sales on such exchange on such day, the average of the highest bid and lowest asked prices on such exchange at the end of such day, or, if on any such day Common Stock is not so listed, the average of the representative bid and asked prices listed in the NASDAQ System as of 4:00 P.M., New York time. "TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law). "UNDERLYING COMMON STOCK" means, at any time, the sum of (i) the number of shares Common Stock of the Company outstanding as of such time plus (ii) the -4- number of shares of Common Stock of the Company issuable upon the exercise or conversion of the Convertible Preferred (as defined in the Purchase Agreement) at such time. 5. LEGEND. The certificates representing the Restricted Shares will bear ------ a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN A RESTRICTED SECURITIES AGREEMENT AMONG GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P., GATOR ASSOCIATES, LTD., MG CAPITAL PARTNERS II, L.P., TARA VENTURES, LTD., AND AN EXECUTIVE OF THE COMPANY DATED AS OF APRIL 23, 1997. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." The Company will remove such legend from any Restricted Shares that are no longer subject to Transfer or contribution pursuant to Section 2. 6. FURTHER ASSURANCES. The parties to this Agreement shall execute and ------------------ deliver such further instruments of conveyance and transfer, and take such additional action, as the parties may at any time reasonably request in order to effectuate? consummate, confirm or evidence the provisions of this Agreement. 7. STOCK POWER. In order to secure Executive's obligations hereunder, on ----------- the date hereof, Executive shall execute and deliver to the Company a stock power, endorsed in blank, relating to the certificates evidencing shares of Restricted Shares. All such certificates and related stock powers shall be held by the Company in trust, and the Company shall deliver them to the parties as contemplated by the provisions contained in this Agreement. 8. NOTICES. All notices, demands or other communications to be given or ------- delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the Investor and to each Executive at the addresses indicated on the Schedule of Holders attached to the Shareholders Agreement and to the Company at the address of its corporate headquarters or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. -5- 9. GENERAL PROVISIONS. ------------------ (a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted ----------------------------------- Transfer of any Restricted Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Restricted Shares as the owner of such stock for any purpose. (b) SEVERABILITY. Whenever possible, each provision of this ------------ Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (c) COMPLETE AGREEMENT. This Agreement, those documents expressly ------------------ referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) COUNTERPARTS. This Agreement may be executed in separate ------------ counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, ---------------------- this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investors and their respective successors and permitted assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable. (f) CHOICE OF LAW. The corporate law of the State of Florida will ------------- govern all questions concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity and interpretation of this Agreement hereto will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Illinois. (g) REMEDIES. Each of the parties to this Agreement (including the -------- Investors) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney's fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of any of the provisions of this Agreement. -6- (H) AMENDMENT AND WAIVER. The provisions of this Agreement may be -------------------- amended and waived only with the prior written consent of each of the Investors and the Executive. (I) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which ---------------------- refer to share prices or number of shares will be appropriately adjusted to reflect stock splits, stock dividends, combinations of shares and other recapitalizations affecting the subject class of stock. -7- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. GATOR ASSOCIATES, LTD. By: /s/ Edmund R. Miller ------------------------------- Its: ------------------------------ TARA VENTURES, LTD. By: /s/ Edmund R. Miller ------------------------------- Its: ------------------------------ GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P. By: GTCR V, L.P. Its: General Partner By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce Rauner ------------------------------- Its: Principal EXECUTIVE [SIGNATURE APPEARS HERE] ---------------------------------- [NAME APPEARS HERE] -8- ADDITIONAL INVESTORS MG CAPITAL PARTNERS II, L.P. By: MG Capital Corp. ------------------------------- Its: General Partner ------------------------------ By: [SIGNATURE APPEARS HERE] ------------------------------- Its: Managing Directors ------------------------------ -9- CONSENT AND ACKNOWLEDGMENT The undersigned agrees to and acknowledges the form of the Restricted Securities Agreement attached hereto and agrees to and acknowledges the transactions referenced in such Restricted Securities Agreement and its obligation thereunder. Dated: April 25, 1997 ANSWERTHINK CONSULTING GROUP, INC. By: /s/ Ted A. Fernandez --------------------------------- Its: CEO -------------------------------- -10- Exhibit A to Restricted Securities Agreement ------------------------------- SCHEDULE OF SHARES No. of ------ Name Shares - - ---- ------ Ted A. Fernandez 300,000 Allan R. Frank 300,000 Olysses S. Knotts, III 300,000 Edmund R. Miller 150,000 -11- EX-10.12 7 EXHIBIT 10.12 EXHIBIT 10.12 FORM OF SENIOR MANAGEMENT AGREEMENT ----------------------------------- THIS AGREEMENT is made as of April 23, 1997, between AnswerThink Consulting Group, Inc., a Florida corporation (the "Company"), and [NAME APPEARS HERE] ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive will purchase, and the Company will sell, 700,000 shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), and, if Executive so elects pursuant to the terms of this Agreement, up to 50,000 shares of the Company's Class A Convertible Preferred Stock, par value $.01 per share (the "Convertible Preferred"). All such shares of Convertible Preferred and Common Stock and all shares of Convertible Preferred and Common Stock hereafter acquired by Executive are referred to herein as "Executive Stock." Certain definitions are set forth in Section 10 of this Agreement. The execution and delivery of this Agreement by the Company and Executive is a condition to the purchase of shares of Convertible Preferred by each of Golder, Thoma, Cressey, Rauner Fund V, L.P. ("GTCR V"), MG Capital Partners II, L.P. ("MG"), Gator Associates, Ltd. ("Gator"), and Tara Ventures, Ltd. ("Tara" and, collectively with Gator, the "Miller Group") pursuant to a purchase agreement between the Company, GTCR V, MG, and the Miller Group dated as of the date hereof (as amended from time to time, the "Purchase Agreement"). Certain provisions of this Agreement are intended for the benefit of, and will be enforceable by the Investors and the Other Executives. The parties hereto agree as follows: PROVISIONS RELATING TO EXECUTIVE STOCK 1. Purchase and Sale of Executive Stock. ------------------------------------ (a) Upon execution of this Agreement, Executive will purchase, and the Company will sell, 700,000 shares of Common Stock at a price of $0.01 per share. The Company will deliver to Executive the certificates representing such Executive Stock, and Executive will deliver to the Company a cashier's or certified check or wire transfer of funds in the aggregate amount of $7,000. (b) During the period from the date of this Agreement through and including the six-month anniversary of the date of this Agreement (or such later date approved in writing by the Board), Executive may, upon not less than three business days notice to the Board, purchase, and the Company will sell, up to 50,000 shares (or such other numbers as contemplated by Section 19 of the Shareholders Agreement) of convertible Preferred at a price of $3.00 per share. The Company will deliver to Executive the certificates representing such shares of Convertible Preferred purchased by Executive, and Executive will deliver to the Company a cashier's or certified check or wire transfer of funds in the aggregate amount equal to the number of shares of Convertible Preferred being purchased multiplied by $3.00. (c) Within 30 days after Executive purchases Common Stock pursuant to Section 1(a) from the Company, Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form of Annex A attached hereto. (d) In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that: (i) The Executive Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws. (ii) Executive is an "accredited investor" and a sophisticated investor for purposes of applicable foreign and U.S. federal and state securities laws and regulations and is able to evaluate the risks and benefits of the investment in the Executive Stock. (iii) Executive is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time because the Executive Stock has not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as he has requested. (v) This Agreement and each of the other agreements contemplated hereby and by the Purchase Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms and Executive's employment by the Company, and the execution, delivery and performance of this Agreement and such other agreements by Executive does not and, to the knowledge of Executive, will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party (including, but not limited to, any agreement referred to in clause (vi) below) or any judgment, order or decree to which Executive is subject and Executive further represents and warrants that Executive believes that Executive is not now in breach of any such agreement, contract or instrument to which Executive is a party. (vi) Except for agreements which are the subject of the litigation with KPMG Peat Marwick as disclosed on Schedule 5G to the ----------- Purchase Agreement, Executive is not a party to or bound by any other employment agreement, noncompete agreement or confidentiality agreement. (vii) Executive is a resident of the State of Florida. (e) As an inducement to the Company to issue the Executive Stock to Executive, and as a condition thereto, Executive acknowledges and agrees that (i) neither the issuance of the Executive Stock to Executive nor any provision contained herein shall entitle Executive to remain in the employment of the Company and its Subsidiaries or affect the right of the Company to terminate Executive's employment as contemplated by this Agreement at any time for any reason and (ii) he will take (or omit to take) all such actions as are necessary so that the representation and warranty made by Executive and contained in Section 1(d)(v) remain true and correct at all times as if such representation and warranty were remade by Executive on each date following the date of this Agreement. -2- 2. Vesting of Certain Executive Stock. ---------------------------------- (a) Except as otherwise provided in Section 2(b) below, 400,000 shares of Common Stock purchased under Section 1(a) (the "Time Vesting Common Stock") will become vested in accordance with the following schedule, if as of each such date Executive is still employed by the Company or any of its Subsidiaries:
Cumulative Percentage of Date Time Vesting Common Stock to be Vested ---- -------------------------------------- 2nd Anniversary of the date of this 50% Agreement 3rd Anniversary of the date of this 75% Agreement 4th Anniversary of the date of this 100% Agreement
All shares of Convertible Preferred purchased hereunder will vest immediately upon such purchase, and all of the shares of Common Stock acquired upon conversion of Convertible Preferred shall vest immediately upon receipt. Restricted Shares shall vest as set forth in the Restricted Securities Agreement. (b) If (but only if) Executive's employment is terminated by the Company without Cause, the aggregate number of shares of Time Vesting Common Stock that shall be deemed vested shall equal (i) the number of shares which have vested pursuant to Section 2(a) as of the date of such termination, which shall in no event be less than 200,000, plus (ii) 50% of the excess of (x) 400,000 over (y) the number of shares included in clause (i) above. Immediately prior to the occurrence of a Sale of the Company, if as of such time Executive is still employed by the Company or any of its Subsidiaries, all shares of Time Vesting Common Stock which have not yet become vested shall become vested at the time of such event. (c) Shares of Non-Restricted Executive Stock which have become vested pursuant to subsections (a) or (b) above are referred to herein as "Vested Shares," and all other shares of Non-Restricted Executive Stock are referred to herein as "Unvested Shares." In addition, Restricted Shares which have become vested pursuant to the Restricted Securities Agreement are referred to herein as "Vested Restricted Shares." 3. Repurchase Option. ----------------- (a) In the event that Executive ceases to be employed by any of the Company and its Subsidiaries for any reason (the "Termination"), the Non- Restricted Executive Stock (whether held by Executive or one or more of Executive's transferees) and the Vested Restricted Shares will be subject to repurchase by the Company, the Investors and the Other Executives pursuant to the terms and conditions set forth in this Section 3 (the "Repurchase Option"). Any shares subject to repurchase pursuant to the Repurchase Option under this Agreement are referred to herein as "Subject Shares." (b) In the event of Termination, (i) the purchase price for each Unvested Share of Common Stock will be Executive's Original Cost for such share, (ii) the purchase price for each Vested Share of Common Stock and for each Vested Restricted Share will be the Fair Market Value -3- for such share and (iii) the purchase price for each share of Convertible Preferred will be the Liquidation Value of such share (as defined in the Company's Articles of Incorporation). (c) The Board may elect to purchase all or any portion of any class of the Subject Shares (including all or any portion of the Unvested Shares and Vested Shares of such class) by delivering written notice (the "Repurchase Notice") to the holder or holders of the Executive Stock within 90 days after the Termination. The Repurchase Notice will set forth the number of Subject Shares (including Unvested Shares and Vested Shares) of each class to be acquired from each holder, the aggregate consideration to be paid for such shares and the proposed time and place for the closing of the transaction. The number of shares to be repurchased by the Company shall first be satisfied to the extent possible from the shares held by Executive at the time of delivery of the Repurchase Notice. If the number of shares of any class then held by Executive is less than the total number of shares of such class which the Company elects and is entitled to purchase pursuant to the Repurchase Option, the Company shall purchase the remaining shares of such class elected to be purchased from the other holder(s), pro rata according to the number of shares of such class held by such other holder(s) at the time of delivery of such Repurchase Notice (determined as nearly as practicable to the nearest share). The number of Unvested Shares and Vested Shares of each class to be repurchased hereunder will be allocated among Executive and the other holders of Non- Restricted Executive Stock (if any) pro rata according to the number of shares of Non-Restricted Executive Stock to be purchased from such person. (d) If for any reason the Company does not elect to purchase all of the Subject Shares pursuant to the Repurchase Option, each of the Investors and the Other Executives shall be entitled to exercise the Repurchase Option for the Subject Shares the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company has determined that there will be Available Shares, but in any event within 120 days after the Termination, the Company shall give written notice (the "Option Notice") to the Investors and the Other Executives setting forth the number of Available Shares and the purchase price for the Available Shares. Each Investor and each Other Executive may elect to purchase any or all of the Available Shares by giving written notice to the Company within one month after the Option Notice has been given by the Company. As soon as practicable, and in any event within ten days after the expiration of the one-month period set forth above, the Company shall notify each holder of Subject Shares as to the number of shares being purchased from such holder by the Investors and the Other Executives (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to such holder(s), the Company shall also deliver written notice to the Investors and the Other Executives setting forth the number of shares each such Person is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. If the Investors and Other Executives elect to purchase an aggregate number of any class or type (i.e., vested or unvested) of Subject Shares greater than the number of such class or type of Subject Shares which such Persons are entitled to purchase pursuant to the Repurchase Option, such class or type shall be allocated among the Investors and Other Executives pro rata based upon the number of shares of Underlying Common Stock owned by each such Person (but in no event shall the pro rata share of any such Person result in such Person acquiring a number of Subject Shares of any class or type in excess of the number of such class or type requested to be purchased by such Person). If the number of shares of any class then held by Executive is less than the total number of shares of such class which the Investors and the Other Executives have elected and are entitled to purchase pursuant to the Repurchase Option, such Persons shall purchase the remaining shares elected to be purchased from the other holder(s) of Non- Restricted Executive Stock under this Agreement, pro rata according to the number of shares of Non-Restricted Executive Stock of such class held by such other holder(s) at the time of delivery of such Repurchase Notice (determined as nearly as practicable to the nearest share). -4- (e) The closing of the purchase of Subject Shares pursuant to the Repurchase Option shall take place on the date designated by the Company in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not be more than one month nor less than five days after the delivery of the last such notice. The Company will pay for the Subject Shares to be purchased by it pursuant to the Repurchase Option by first offsetting amounts outstanding under any bona fide debts owed by Executive to the Company; upon full repayment of such bona fide debts, the Company will make payment by, subject to Subsection (f) below, a check or wire transfer of funds. Each Investor and Other Executive will pay for Subject Shares to be purchased pursuant to the Repurchase Option by check or wire transfer of funds. Each purchaser of Subject Shares pursuant to the Repurchase Option will be entitled to receive customary representations and warranties from the sellers regarding such sale and to require all sellers' signatures be guaranteed. (f) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Subject Shares by the Company shall be subject to applicable restrictions contained in the Florida Business Corporation Act and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Subject Shares hereunder which the Company is otherwise entitled or required to make, the Company may make such repurchases as soon as it is permitted to do so under such restrictions. 4. Restrictions on Transfer of Executive Stock. ------------------------------------------- (a) Retention of Non-Restricted Executive Stock. Until the fourth ------------------------------------------- anniversary of the date of this Agreement, Executive shall not sell, transfer, assign, pledge or otherwise dispose of any interest in any shares of Executive Stock, except for Exempt Transfers (as defined in Section 4(b) below). (b) Transfer of Executive Stock. Subject to Section 4(a) above, --------------------------- Executive shall not Transfer any interest in any shares of Executive Stock, except pursuant to (i) the provisions of Section 3 hereof, a Public Sale, a Sale of the Company or the provisions of the Restricted Securities Agreement ("Exempt Transfers") or (ii) the provisions of this Section 4; provided that in no event shall any Transfer of Executive Stock pursuant to this clause (ii) be made for any consideration other than cash payable upon consummation of such Transfer; and provided further that Unvested Shares may only be Transferred pursuant to the provisions of Section 3 hereof; and provided further that Restricted Shares that remain unvested under the Restricted Securities Agreement may only be Transferred pursuant to the Restricted Securities Agreement. Executive will not consummate any Transfer permitted by clause (ii) of the preceding sentence until 60 days after the Sale Notice has been given to the Company, the Investors and the Other Executives, unless the parties to the Transfer have been finally determined pursuant to this Section 4 prior to the expiration of such 60-day period. (The date of the first to occur of such events is referred to herein as the "Authorization Date".) (c) First Refusal Rights. The Company may elect to purchase all (but -------------------- not less than all) of the shares of Executive Stock to be transferred upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to Executive, the Investors and Other Executives within 20 days after the Sale Notice has been given to the Company. If the Company has not elected to purchase all of the Executive Stock to be transferred, each Investor and each Other Executive may elect to purchase all or any portion of the Executive Stock to be transferred upon the same terms and conditions as those set forth in the Sale Notice by giving written notice of such election to Executive within 40 days after the Sale Notice has been given to the Investors and each Other Executive. If the Investors and the Other Executives elect to purchase an aggregate number of any class of Executive Stock greater than the number of such class of Executive Stock specified in the Sale Notice, such number of shares of Executive Stock shall be allocated among -5- the Investors pro rata based upon the number of shares of Underlying Common Stock owned by each such Investor and Other Executive (but in no event shall the pro rata share of any Investor or Other Executive result in such Investor or Other Executive acquiring a number of any class of Executive Stock in excess of the number of such class of Executive Stock requested by such Investor or Other Executive). If neither the Company nor, in the aggregate, the Investors and the Other Executives elect to purchase all of the shares of Executive Stock specified in the Sale Notice, Executive may transfer the shares of Executive Stock specified in the Sale Notice, subject to the provisions of Section 4(d) below, at a price and on terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 60-day period immediately following the Authorization Date. Any shares of Executive Stock not transferred within such 60-day period will be subject to the provisions of this Section 4(c) upon subsequent transfer. The Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company with the balance, if any, subject to Section 3(f) (except "Subject Shares" shall be deemed to refer to "Executive Shares") by check or wire transfer of funds. (d) Participation Rights. If neither the Company nor, in the -------------------- aggregate, the Investors and Other Executives have elected to purchase all of the Executive Stock specified in the Sale Notice pursuant to Section 4(c) above, each Investor and Other Executive may eject to participate in the contemplated Transfer by delivering written notice to Executive and the Company within 50 days after receipt by such Investor or Other Executive of the Sale Notice. If any Investor or Other Executive has elected to participate in such sale, Executive and such Investor or Other Executive will be entitled to sell in the contemplated sale, at the same price and on the same terms, a number of shares of the Company's Common Stock equal to the product of (i) the quotient determined by dividing the percentage of the Company's Underlying Common Stock held by such Person, by the aggregate percentage of the Company's Underlying Common Stock owned by Executive (including both Vested and Unvested Shares) and the Investors and the Other Executives participating in such sale and (ii) the number of shares of Common Stock to be sold in the contemplated sale. Any purchaser in a sale subject to this Section 4(d) will be required to purchase from each Investor and Other Executive electing to participate, at such Person's election, a portion of the Convertible Preferred held by such Person equal to the greater of the percentage of (x) such Person's Common Stock being sold in such transaction and (y) Executive's Convertible Preferred being sold in such transaction. For example, if: -- (i) the Sale Notice contemplated a sale of 100 shares of Common Stock; (ii) Executive was at such time the owner of 200 shares of Underlying Common Stock (which was equal to 20% of the total Underlying Common Stock); and (iii) one Investor elected to participate and that Investor owned 600 shares of Underlying Common Stock (which was equal to 60% of the total Underlying Common Stock) and 250 shares of Convertible Preferred; then ---- (A) Executive would be entitled to sell 25 shares of Common Stock (20%/80% x 100 shares); and (B) that Investor would be entitled to sell 75 shares of Common Stock (60%/80% x 100 shares) and 31.25 shares of Convertible Preferred (the same -6- percentage of that Investor's Convertible Preferred as the percentage of that Investor's Common Stock being sold, i.e., 12.5%). Executive will use his best efforts to obtain the agreement of the prospective transferee(s) to the participation of each Investor and Other Executive desiring to participate in the contemplated Transfer and will not transfer any Executive Stock to the prospective transferee(s) if such transferee(s) refuses to allow the participation of such Investor and Other Executive. (e) Certain Permitted Transfers. The restrictions contained in this --------------------------- Section 4 will not apply with respect to (i) transfers of shares of Executive Stock pursuant to applicable laws of descent and distribution or (ii) transfer of shares of Executive Stock among Executive's Family Group; provided that such restrictions will continue to be applicable to the Executive Stock after any such transfer and the transferees of such Executive Stock have agreed in writing to be bound by the provisions of this Agreement. In addition, following the completion of an underwritten Public Offering, Executive, in his sole discretion, may pledge any of his Executive Stock (other than Unvested Shares or Restricted Shares that have not vested under the Restricted Securities Agreement) as collateral for a loan so long as the pledgee of such stock and the Executive enter in a pledge agreement in form and substance reasonably satisfactory to the Board, pursuant to which pledgee, among other things, agrees that pledgee may only sell such Executive Stock in a Public Sale. (f) No Transfers of Restricted Shares. Notwithstanding anything --------------------------------- contained herein to the contrary (including, without limitation, the other provisions of this Section 4), Executive may not transfer, assign, pledge or otherwise dispose of any interest in any Unvested Shares (except pursuant to Section 3 hereof) or any Restricted Shares that remain unvested under the Restricted Securities Agreement (except pursuant to the Restricted Securities Agreement). (g) Termination of Restrictions. The restrictions on the Transfer of --------------------------- shares of Executive Stock set forth in this Section 4 will continue with respect to each such share of Executive Stock until the date on which such Executive Stock has been transferred in a transaction permitted by this Section 4 (except in a transaction contemplated by Section 4(e)); provided that in any event such restrictions will terminate on a Sale of the Company. 5. Additional Restrictions on Transfer of Executive Stock. ------------------------------------------------------ (a) Legend. The certificates representing the Executive Stock will ------ bear a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF APRIL 23, 1997, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"); AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED AS OF APRIL 23, 1997. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." -7- (b) Opinion of Counsel. No holder of Executive Stock may sell, ------------------ transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. 6. Limited Preemptive Rights. ------------------------- (i) Except for the issuance of Common Stock (a) to the Other Executives pursuant to the Senior Management Agreements, (b) in connection with acquisitions exempted herefrom by the Company's board of directors, (c) to employees pursuant to stock option plans, stock ownership plans and other employment arrangements approved by the Board or (d) pursuant to a public offering registered under the Securities Act, if the Company at any time after the Closing authorizes the issuance or sale of any shares of Common Stock or any securities containing options or rights to acquire any shares of Common Stock (other than as a dividend on the outstanding Common Stock), the Company shall first offer to sell to each holder of Executive Stock a portion of such stock or securities equal to the quotient determined by dividing (1) the number of shares of Underlying Common Stock held by such holder by (2) the total number of shares of Underlying Common Stock immediately prior to such issuance. Each holder of Executive Stock so exercising shall also purchase the same percentage of any other class of Company securities (whether debt or equity) being sold with the Common Stock. Each holder of Executive Stock shall be entitled to purchase all or any portion of such stock or securities at the most favorable price and on the most favorable terms as such stock or securities are to be offered to any other Persons. (ii) In order to exercise its purchase rights hereunder, a holder of Executive Stock must within 30 days after receipt of written notice from the Company describing in reasonable detail the stock or securities being offered, the purchase price thereof, the payment terms and such holder's percentage allotment, deliver a written notice to the Company describing its election hereunder. If all of the stock and securities offered to the holders of Executive Stock are not fully subscribed by such holders, the remaining stock and securities shall be reoffered by the Company to the holders purchasing their full allotment upon the terms set forth in this paragraph, except that such holders must exercise their purchase rights within 15 days after receipt of such reoffer. (iii) Upon the expiration of the offering periods described above, the Company shall be entitled to sell such stock or securities which the holders of Executive Stock have not elected to purchase during the 90 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to such holders. Any stock or securities offered or sold by the Company after such 90-day period must be reoffered to the holders of Executive Stock pursuant to the terms of this paragraph. (iv) Nothing contained in this Section 6 shall be deemed to amend, modify or limit in any way the restrictions on the issuance of shares of Common Stock set forth in the Purchase Agreement, in the Shareholders Agreement or in any other agreement to which the Company is bound. PROVISIONS RELATING TO EMPLOYMENT 7. Employment. The Company agrees to employ Executive and ---------- Executive accepts such employment for the period beginning as of the date hereof and ending upon the earlier of three years from the date hereof (or such later date as agreed by Executive and the Company) and termination pursuant to Section 7(b) hereof (the "Employment Period"). -8- (a) Salary, Bonus and Benefits. During the Employment Period, the -------------------------- Company will pay Executive a base salary (the "Annual Base Salary") as the Board may designate from time to time, at the rate of not less than $500,000 per annum. Executive will also be eligible to earn a bonus pursuant to a bonus plan adopted by the Board for each fiscal year. Executive's Annual Base Salary for any partial year will be prorated based upon the number of days elapsed in such year. In addition, during the Employment Period, Executive will be entitled to such other benefits approved by the Board and made available to the Company's senior management. (b) Termination. The Employment Period will continue until ----------- Executive's resignation, disability (as determined by the Board in its good faith judgment) or death or until the Board determines in its good faith judgment that termination of Executive's employment is in the best interests of the Company. If Executive's employment is terminated by the Company without Cause, during the one-year period commencing on the date of termination (the "Initial Period"), the Company shall pay Executive an aggregate amount equal to Executive's Annual Base Salary, payable in equal installments on the Company's regular salary payment dates (the "Severance Payments"). In addition, the Company shall have the option, by delivering written notice to Executive within 90 days after the date of termination, to extend the severance period up to the second anniversary of the date of termination (the "Extended Period"). During the Extended Period, the Company will continue to make Severance Payments at same annual rate to Executive. Notwithstanding the foregoing and without in any way modifying the provisions of Section 9 hereof, from and after the first date that Executive becomes employed with another Person, the Company, at its option, may eliminate or otherwise reduce the amount of Severance Payments otherwise required to be made pursuant to this Section 7(b). 8. Confidential Information. ------------------------ (a) Executive acknowledges that the information, observations and date obtained by him concerning the business and affairs of the Company and its affiliates and its and their predecessors during the course of his performance of services for, or employment with, any of the foregoing persons (whether or not compensated for such services) are the property of the Company and its affiliates, including information concerning acquisition opportunities in or reasonably related to the Company's business or industry of which Executive becomes aware during such period, and any Initial Period or Extended Period. Therefore, Executive agrees that he will not at any time (whether during or after the Employment Period) disclose to any unauthorized person or, directly or indirectly, use for his own account, any of such information, observations or data without the Board's consent, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executive's acts or omissions to act or the acts or omissions to act of other senior or junior management employees of the Company or any of its Subsidiaries. Executive agrees to deliver to the Company at the termination of his employment, or at any other time the Company may request in writing (whether during or after the Employment Period), all memoranda, notes, plans, records, reports and other documents, regardless of the format or media (and copies thereof), relating to the business of the Company and its affiliates and its and their predecessors (including, without limitation, all acquisition prospects, lists and contact information) which he may then possess or have under his control. (b) Inventions and Patents. Executive acknowledges that all ---------------------- inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information(whether or not patentable) that relate to the Company's or any of its Subsidiaries' actual or anticipated business, research and development or existing or future products or services and that are conceived, developed, made or reduced to practice by Executive while employed by the Company and its Subsidiaries or any of its and their predecessors ("Work Product") belong to the Company or such Subsidiary and Executive hereby assigns, and agrees to assign, all of -9- the above to the Company or such Subsidiary. Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a "work made for hire" under the copyright laws, and the Company or such Subsidiary shall own all rights therein. To the extent that any such copyrightable work is not a "work made for hire," Executive hereby assigns and agrees to assign to Company or such Subsidiary all right, title and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the Company's or its Subsidiary's ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 9. Noncompetition and Nonsolicitation. ---------------------------------- (a) Noncompetition. Executive acknowledges that in the course of his -------------- employment with predecessors of the Company and its affiliates, he has become familiar with, and during the course of his employment with the Company and its Subsidiaries he will become familiar with, the Company's and its affiliates' trade secrets and with other confidential information concerning the Company and its affiliates and that Executive's services will be of special, unique and extraordinary value to the Company and its Subsidiaries and that the Company's ability to accomplish its purposes and to successfully pursue its business plan and compete in the marketplace depend substantially on the skills and expertise of Executive. Therefore, and in further consideration of the compensation being paid to Executive hereunder, and the Vesting Common Stock being issued to Executive hereunder, Executive agrees that, during the Employment Period and any Initial Period or Extended Period, so long as Severance Payments are being made unless Severance Payments are not required to be made pursuant to the last sentence of Section 7(b) (the "Noncompete Period"), he shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business competing with the businesses of the Company, its Subsidiaries, or any business in which the Company or its Subsidiaries has commenced negotiations or has requested and received information relating to the acquisition of such business within eighteen months prior to the termination of the Executive's employment with the Company, in any country where the Company, its Subsidiaries, or other aforementioned business conducts business. (b) Nonsolicitation. During the two years following Termination, --------------- Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any Subsidiary to leave the employ of the Company or such Subsidiary, or in any way willfully interfere with the relationship between the Company or any Subsidiary and any employee thereof, (ii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary or (iii) initiate or engage in any discussions regarding an acquisition of, or Executive's employment (whether as an employee, an independent contractor or otherwise) by, any businesses in which the Company or any of its Subsidiaries has entertained discussions or has requested and received information relating to the acquisition of such business by the Company or its Subsidiaries upon or within the 18 month period prior to the termination of the Executive's employment with the Company. (c) Enforcement. If, at the time of enforcement of Section 8 or 9 of ----------- this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum -10- duration, scope and area permitted by law. Because Executive's services are unique and because Executive has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). GENERAL PROVISIONS 10. Definitions. ----------- "Affiliate" of any Investor means any direct or indirect general or --------- limited partner of such Investor, or any employee or owner thereof, or any other person, entity or investment fund controlling, controlled by or under common control with such Investor, and will include, without limitation, with respect to GTCR V, Golder, Thoma, Cressey, Rauner, Inc. and its owners and employees. "Cause" means (i) the commission of a felony or a crime involving ----- moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to the Company or any of its Subsidiaries or any of their customers or suppliers, (ii) conduct tending to bring the Company or any of its Subsidiaries into substantial public disgrace or disrepute, (iii) substantial and repeated failure to perform duties of the office held by Executive as reasonably directed by the Board, and such failure is not cured within 30 days after Executive receives notice thereof from the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any breach of Section 8 or 9 of this Agreement. "Executive's Family Group" means Executive's spouse and descendants ------------------------ (whether natural or adopted), any trust solely for the benefit of Executive and/or Executive's spouse and/or descendants and any retirement plan for the Executive. "Executive Stock" will continue to be Executive Stock in the hands of --------------- any holder other than Executive (except for the Company, an Investor, an Other Executive and transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by way of a stock split, stock dividend or other recapitalization. "Fair Market Value" of each share of Executive Stock means the average ----------------- of the closing prices of the sales of the Common Stock on all securities exchanges on which such Common Stock may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such Common Stock is not so listed, the average of the representative bid and asked prices listed in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such Common Stock is not quoted in the NASDAQ System, of the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time such Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-countermarket, the Fair Market Value will be the fair value of such Common Stock determined in good faith by the Board. If the Executive reasonably disagrees with such determination, the Board and the Executive will -11- negotiate in good faith to agree on such Fair Market Value. If such agreement is not reached within 30 days after the delivery of the Repurchase Notice or the Supplemental Repurchase Notice, Fair Market Value shall be determined by an appraiser jointly selected by the Board and the Executive, which appraiser shall submit to the Board and the Executive a report within 30 days of its engagement setting forth such determination. If the parties are unable to agree on an appraiser within 45 days after delivery of the Repurchase Notice or the Supplemental Repurchase Notice, within seven days, each party shall submit the names of four nationally recognized investment banking firms, and each party shall be entitled to strike two names from the other party's list of firms, and the appraiser shall be selected by lot from the remaining four investment banking firms. The expenses of such appraiser shall be borne by the Executive unless the appraiser's valuation is not less than 10% greater then the amount determined by the Board, in which case, the costs of the appraiser shall be borne by the Company. The determination of such appraiser shall be final and binding upon all parties. If the Repurchase Option is exercised within 90 days after a Termination, then Fair Market Value shall be determined as of the date of such Termination; thereafter, Fair Market Value shall be determined as of the date the Repurchase Option is exercised. "Investors" means GTCR V, MG, the Miller Group and each of their --------- successors, and to the extent permitted to be a subsequent holder of Convertible Preferred pursuant to the Purchase Agreement, assigns. "Original Cost" means with respect to each share of Common Stock ------------- purchased hereunder, $0.01 (as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). "Other Executives" means each person who is subject to a Senior ---------------- Management Agreement substantially similar to this Agreement so long as such person is employed by the Company. "Non-Restricted Executive Stock" means Executive Stock other than ------------------------------ Restricted Shares. "Person" means an individual, a partnership, a limited liability ------ company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization end a governmental entity or any department, agency or political subdivision thereof. "Public Sale" means any sale pursuant to a registered public offering ----------- under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "Public Offering" means the sale in an underwritten public offering --------------- registered under the Securities Act of shares of the Company's Common Stock approved by the board of directors of the Company. "Restricted Securities Agreement" means the Restricted Securities ------------------------------- Agreement dated as of the date hereof between the Executive and the Investors, as amended from time to time. "Restricted Shares" means 300,000 shares of Common Stock purchased ----------------- under Section 1(a) hereof, which shares are subject to the Restricted Securities Agreement. "Sale of the Company" means any transaction or series of transactions ------------------- pursuant to which any person(s) or entity(ies) other than an Investor and its Affiliates in the aggregate acquire(s) (i) capital stock of the Company possessing the voting power (other than voting rights accruing only -12- in the event of a default, breach or event of noncompliance) to elect a majority of the Company's board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company's capital stock, shareholder or voting agreement, proxy, power of attorney or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis; provided that the term "Sale of the Company" shall not include any sale of equity or debt securities by the Company in a private or public offering to other investors selected by GTCR V. "Securities Act" means the Securities Act of 1933, as amended from -------------- time to time. "Shareholders Agreement" means the Shareholders Agreement dated as of ---------------------- the date hereof among the Executive, the Other Executives, the Investors, certain other individuals, and the Company, as amended from time to time. "Subsidiary" means any corporation of which the Company owns ---------- securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. "Transfer" means to sell, transfer, assign, pledge or otherwise -------- dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law). "Underlying Common Stock" means, at any time, the sum of (i) the ----------------------- number of shares of Common Stock of the Company outstanding as of such time plus (ii) the number of shares of Common Stock of the Company issuable upon the exercise or conversion of the Convertible Preferred (as defined in the Purchase Agreement) at such time. 11. Notices. ------- All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the Investor and to each Executive at the addresses indicated on the Schedule of Holders attached to the Shareholders Agreement and to the Company at the address of its corporate headquarters or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 12. General Provisions. ------------------ (a) Transfers in Violation of Agreement. Any Transfer or attempted ----------------------------------- Transfer of any Executive Stock in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Executive Stock as the owner of such stock for any purpose. (b) Severability. Whenever possible, each provision of this Agreement ------------ will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. -13- (c) Complete Agreement. This Agreement, those documents expressly ------------------ referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Executive hereby releases the Company and its affiliates and its and their predecessors from any obligation or liability the Company or any of its affiliates or its or their predecessors owes or owed to Executive or any of his affiliates and related persons prior to the date hereof. (d) Counterparts. This Agreement may be executed in separate ------------ counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (e) Successors and Assigns. Except as otherwise provided herein, this ---------------------- Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investors, the Other Executives and their respective successors and permitted assigns (including subsequent holders of Executive Stock); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Stock hereunder. (f) Choice of Law. The corporate law of the State of Florida will ------------- govern all questions concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will-be governed by and construed in accordance with the internal laws of the State of Florida (in the case of Sections 7, 8 and 9 hereof) and Illinois (in all other cases), without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois, the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida (in the case of Sections 7, 8 and 9 hereof) or the State of Illinois (or the State of Florida, in all other cases). (g) Remedies. Each of the parties to this Agreement (including the -------- Investors and the Other Executives) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney's fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of any of the provisions of this Agreement. (h) Amendment and Waiver. The provisions of this Agreement may be -------------------- amended and waived only with the prior written consent of at least 70% of the Company's board of directors and the Executive. (i) Business Days. If any time period for giving notice or taking ------------- action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. (j) Indemnification and Reimbursement of Payments on Behalf of ---------------------------------------------------------- Executive. The Company and its Subsidiaries shall be entitled to deduct or - - --------- withhold from any amounts owing from the Company or any of its Subsidiaries to the Executive any federal, state, local or foreign -14- withholding taxes, excise taxes, or employment taxes ("Taxes") imposed with respect to the Executive's compensation or other payments from the Company or any of its Subsidiaries or the Executive's ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock. The Executive shall indemnify the Company and its Subsidiaries for any amounts paid with respect to any such Taxes, together with any interest, penalties and related expenses thereto. (k) Termination. This Agreement (except for the provisions of Section ----------- 7(a)) shall survive the termination of Executive's employment with the Company and shall remain in full force and effect after such termination. (l) Adjustments of Numbers. All numbers set forth herein which refer ---------------------- to share prices or numbers or amounts will be appropriately adjusted to reflect stock splits, stock dividends, combinations of shares and other recapitalizations affecting the subject class of stock. (m) Other Senior Management Agreements. By signing this Agreement, ---------------------------------- Executive agrees to and accepts the provisions of the Senior Management Agreement with each Other Executive. (n) Netsol. As soon as reasonably practical but in any event within ------ 30 days from the date hereof, Executive will use his best efforts to take such actions as are necessary to permit GTCR V to acquire good and marketable title to, free and clear of all liens, claims and other restrictions, 2206 shares of Netsol International, Inc., a Florida corporation ( "Netsol") common stock from existing Netsol shareholders at a price of no greater than $300.00 per share. To the extent that, despite Executive's best efforts, GTCR V is unable to purchase all of the shares of Netsol common stock specified above within 30 days from the date hereof, Executive shall cause Netsol to immediately issue to GTCR V, at a price of no greater than $300.00 per share, good and marketable title to, free and clear of all liens, claims and other restrictions, such number of shares of Netsol common stock as are necessary to cause GTCR V's fully-diluted ownership interest in Netsol, on the one hand, as compared to that of Executive and the Other Executives, on the other hand, immediately after such issuance by Netsol, to be the same relative ownership interest in Netsol had GTCR V purchased the full number of shares from the existing Netsol shareholders as specified above. Executive will take such actions as are necessary to cause GTCR V to receive standard and customary representations and warranties at the time of GTCRV's investment in Netsol, including, without limitation, representations and warranties of the type contained in the Purchase Agreement and such other representations and warranties regarding the capitalization and financial and asset condition of Netsol as GTCR V reasonably requests. Without limiting the foregoing, Executive represents and warrants that (i) as of, and after giving effect to, the closing of the transactions contemplated by this clause (n), neither Netsol nor any of its subsidiaries shall have incurred, assumed or become liable for any indebtedness for borrowed money or other similar indebtedness and (ii) the holder of each share of capital stock, and of each option or right or security exercisable or convertible into capital stock, of Netsol and the number of shares of such capital stock, and the number of shares of such capital stock that such option, right or security is exercisable or convertible into, that are held by such holder immediately prior to, and after, the closing of the transactions contemplated by this clause (n) is set forth on Annex B attached hereto. * * * * * IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. ANSWERTHINK CONSULTING GROUP, INC. -15- By: /s/ Ted A. Fernandez ------------------------------ Its: CEO ----------------------------- [SIGNATURE APPEARS HERE] ---------------------------- [NAME APPEARS HERE] -16- Agreed and Accepted: GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P. By: GTCR V, L.P. Its: General Partner By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce Rauner ----------------------------- Its: Principal GATOR ASSOCIATES, LTD. By: /s/ Edmund R. Miller ----------------------------- Its: ----------------------------- TARA VENTURES, LTD. By: /s/ Edmund R. Miller ----------------------------- Its: ----------------------------- MG CAPITAL PARTNERS II, L.P. By: MG Capital Corp. ----------------------------- Its: General Partner ----------------------------- By: [SIGNATURE APPEARS HERE] ----------------------------- Its: Managing Director ----------------------------- -17- AnswerThink Consulting Group, Inc. Schedule to Exhibit 10.12 Executives Party to Senior Management Agreement: - - ----------------------------------------------- Ted A. Fernandez Allan R. Frank Ulysses S. Knotts, III -18- EX-10.13 8 EXHIBIT 10.13 EXHIBIT 10.13 SENIOR MANAGEMENT AGREEMENT --------------------------- THIS AGREEMENT is made as of April 23, 1997, between AnswerThink Consulting Group, Inc., a Florida corporation (the "Company"), and Edmund R. Miller ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive will purchase, and the Company will sell, 300,000 shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), and, if Executive so elects pursuant to the terms of this Agreement. All of such shares of Common Stock and all shares of Common Stock hereafter acquired by Executive or one or more of Executive's transferees, other than the Company, an Investor or a transferee in a Public Sale, are referred to herein as "Executive Stock." Certain definitions are set forth in Section 6 of this Agreement. The execution and delivery of this Agreement by the Company and Executive is a condition to the purchase of shares of Convertible Preferred by each of Golder, Thoma, Cressey, Rauner Fund V, L.P., a Delaware limited partnership ("GTCR V"), MG Capital Partners II, L.P., a Delaware limited partnership ("MG"), Gator Associates, Ltd., a Florida limited partnership ("Gator"), and Tara Ventures, Ltd., a British Virgin Islands Corporation ("Tara" and, collectively with Gator, the "Miller Group") pursuant to a purchase agreement between the Company, GTCR V, MG, and the Miller Group dated as of the date hereof (as amended from time to time, the "Purchase Agreement"). Certain provisions of this Agreement are intended for the benefit of, and will be enforceable by the Investors. The parties hereto agree as follows: PROVISIONS RELATING TO EXECUTIVE STOCK 1. Purchase and Sale of Executive Stock. ------------------------------------ (a) Upon execution of this Agreement, Executive will purchase, and the Company will sell, 300,000 shares of Common Stock at a price of $0.01 per share. The Company will deliver to Executive the certificates representing such Executive Stock, and Executive will deliver to the Company a cashier's or certified check or wire transfer of funds in the aggregate amount of $3,000. (b) Within 30 days after Executive purchases Common Stock pursuant to Section 1(a) from the Company, Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form of Annex A attached hereto. (c) In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that: (i) The Executive Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws. (ii) Executive is an "accredited investor" and a sophisticated investor for purposes of applicable foreign and U.S. federal and state securities laws and regulations and is able to evaluate the risks and benefits of the investment in the Executive Stock. (iii) Executive is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time because the Executive Stock has not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as he has requested. (v) This Agreement and each of the other agreements contemplated hereby and by the Purchase Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms and Executive's employment by the Company, and the execution, delivery and performance of this Agreement and such other agreements by Executive does not and, to the knowledge of Executive, will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party (including, but not limited to, any agreement referred to in clause (vi) below) or any judgment, order or decree to which Executive is subject and Executive further represents and warrants that Executive believes that Executive is not now in breach of any such agreement, contract or instrument to which Executive is a party. (vi) Executive is not a party to or bound by any other employment agreement, noncompete agreement or confidentiality agreement. (vii) Executive is a resident of the State of Florida. (d) As an inducement to the Company to issue the Executive Stock to Executive, and as a condition thereto, Executive acknowledges and agrees that (i) neither the issuance of the Executive Stock to Executive nor any provision contained herein shall entitle Executive to remain in the employment of the Company and its Subsidiaries or affect the right of the Company to terminate Executive's employment as contemplated by this Agreement at any time for any reason and (ii) he will take (or omit to take) all such actions as are necessary so that the representation and warranty made by Executive and contained in Section 1(c)(v) remain true and correct at all times as if such representation and warranty were remade by Executive on each date following the date of this Agreement. -2- 2. Restrictions on Transfer of Executive Stock. ------------------------------------------- (a) Executive Stock is transferable only pursuant to (i) a Public Sale or (ii) subject to the conditions specified in subparagraph (c) below, Rule 144A of the Securities and Exchange Commission (or any similar rule then in force) if such rule is available or any other legally available means of transfer. (b) In connection with the transfer of any Executive Stock, Executive shall deliver written notice to the Company describing in reasonable detail the transfer or proposed transfer, together with an opinion of counsel which (to the Company's reasonable satisfaction) is knowledgeable in securities law matters to the effect that such transfer of Executive Stock may be effected without registration of such Executive Stock under the Securities Act and applicable state securities laws. In addition, if Executive delivers to the Company an opinion of counsel that no subsequent transfer of such Executive Stock shall require registration under the Securities Act, the Company shall promptly upon such contemplated transfer deliver new certificates for such Executive Stock which do not bear the Securities Act legend set forth in Section 3. If the Company is not required to deliver new certificates for such Executive Stock not bearing such legend, Executive shall not transfer the same until the prospective transferee has confirmed to the Company in writing its agreement to be bound by the conditions contained in this paragraph and Section 3. (c) Upon the request of Executive, the Company shall promptly supply to Executive or his prospective transferees all information regarding the Company required to be delivered in connection with a transfer pursuant to Rule 144A of the Securities and Exchange Commission. (d) If Executive desires to transfer all or a portion of the Executive Stock (other than in a Public Sale), Executive shall deliver a written notice (the "Offer Notice") to the Company, the Other Executives and the Investors (the "Other Holders"). The Offer Notice shall disclose in reasonable detail the proposed number of shares of Executive Stock to be transferred and the proposed sale price, terms and conditions of the transfer. Each Other Holder may elect to purchase all or any portion of the Executive Stock specified in the Offer Notice at the price and on the terms specified therein by delivering written notice (the "Reply Notice") of such election to the Company and each Other Holder as soon as practical but in any event within 20 days after delivery of the Offer Notice. If the Other Holders elect to purchase an aggregate number of any type of Executive Stock greater than the number of such type of Executive Stock specified in the Offer Notice, such type of Executive Stock shall be allocated among the Other Holders pro rata based upon the number of shares of Underlying Common Stock owned by each Other Holder desiring to acquire such type of Executive Stock pursuant to this Section 2(d) (but in no event shall the pro rata share of any such Other Holder result in such Other Holder acquiring a number of any type of Executive Stock in excess of the number of such Executive Stock requested by such Other Holder). If the Other Holders have elected to purchase all or any portion of the Executive Stock from Executive, the transfer of such shares shall be consummated as soon as practical after the delivery of the last Reply Notice, but in any event within 40 days after the delivery of such notice. To the extent that the other Holders have not elected to purchase all of the Executive Stock being offered, Executive may, within 90 days after delivery of the Offer Notice to the Other Holders, transfer such Executive Stock to one or more third parties at a price no less than the price per share specified in the Offer Notice and on other terms no more favorable to the transferees than offered to the Other Holders. The purchase price specified in any Offer Notice shall be payable solely in cash at the closing of the transaction or, if mutually agreed upon by the parties, in installments over time. -3- (e) Certain Permitted Transfers. The restrictions contained in this --------------------------- Section 2 will not apply with respect to (i) transfers of shares of Executive Stock pursuant to applicable laws of descent and distribution or (ii) transfer of shares of Executive Stock among Executive's Family Group; provided that such restrictions will continue to be applicable to the Executive Stock after any such transfer and the transferees of such Executive Stock have agreed in writing to be bound by the provisions of this Agreement. In addition, following the completion of an underwritten Public Offering, Executive, in his sole discretion, may pledge any of his Executive Stock (other than Restricted Shares that have not vested under the Restricted Securities Agreement) as collateral for a loan so long as the pledgee of such stock and the Executive enter in a pledge agreement in form and substance reasonably satisfactory to the Board, pursuant to which pledgee, among other things, agrees that pledgee may only sell such Executive Stock in a Public Sale. (f) No Transfers of Restricted Shares. Notwithstanding anything --------------------------------- contained herein to the contrary (including, without limitation, the other provisions of this Section 2), Executive may not transfer, assign, pledge or otherwise dispose of any interest in any Unvested Shares (except pursuant to Section 3 hereof) or any Restricted Shares that remain unvested under the Restricted Securities Agreement (except pursuant to the Restricted Securities Agreement). 3. Legend. The certificates representing the Executive Stock will ------ bear a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF APRIL 23, 1997, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED AS OF APRIL 23, 1997. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." -4- PROVISIONS RELATING TO EMPLOYMENT 4. Employment. The Company agrees to employ Executive and ---------- Executive accepts such employment for the period beginning as of the date hereof and ending upon the earlier of one year from the date hereof (or such later date as agreed by Executive and the Company) and termination pursuant to Section 4(b) hereof (the "Employment Period"). -5- (a) Responsibilities. During the Employment Period, Executive will ---------------- perform such services as the Board may reasonably request from time to time for such compensation as the Board and Executive may agree from time to time. (b) Termination. The Employment Period will continue until ----------- Executive's resignation, disability (as determined by the Board in its good faith judgment) or death or until the Board determines in its good faith judgment that termination of Executive's employment is in the best interests of the Company. 5. Confidential Information. ------------------------ (a) Executive acknowledges that the information, observations and date obtained by him concerning the business and affairs of the Company and its affiliates and its and their predecessors during the course of his performance of services for, or employment with, any of the foregoing persons (whether or not compensated for such services) are the property of the Company and its affiliates, including information concerning acquisition opportunities in or reasonably related to the Company's business or industry of which Executive becomes aware during such period, and any Initial Period or Extended Period. Therefore, Executive agrees that he will not at any time (whether during or after the Employment Period) disclose to any unauthorized person or, directly or indirectly, use for his own account, any of such information, observations or data without the Board's consent, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executive's acts or omissions to act or the acts or omissions to act of other senior or junior management employees of the Company or any of its Subsidiaries. Executive agrees to deliver to the Company at the termination of his employment, or at any other time the Company may request in writing (whether during or after the Employment Period), all memoranda, notes, plans, records, reports and other documents, regardless of the format or media (and copies thereof), relating to the business of the Company and its affiliates and its and their predecessors (including, without limitation, all acquisition prospects, lists and contact information) which he may then possess or have under his control. (b) Inventions and Patents. Executive acknowledges that all ---------------------- inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information(whether or not patentable) that relate to the Company's or any of its Subsidiaries' actual or anticipated business, research and development or existing or future products or services and that are conceived, developed, made or reduced to practice by Executive while employed by the Company and its Subsidiaries or any of its and their predecessors ("Work Product") belong to the Company or such Subsidiary and Executive hereby assigns, and agrees to assign, all of -6- the above to the Company or such Subsidiary. Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a "work made for hire" under the copyright laws, and the Company or such Subsidiary shall own all rights therein. To the extent that any such copyrightable work is not a "work made for hire," Executive hereby assigns and agrees to assign to Company or such Subsidiary all right, title and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the Company's or its Subsidiary's ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). -7- GENERAL PROVISIONS 6. Definitions. ----------- "Executive's Family Group" means Executive's spouse and descendants ------------------------ (whether natural or adopted), any trust solely for the benefit of Executive and/or Executive's spouse and/or descendants and any retirement plan for the Executive. "Executive Stock" will continue to be Executive Stock in the hands of --------------- any holder other than Executive (except for the Company, an Investor, an Other Executive and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by way of a stock split, stock dividend or other recapitalization. -8- "Investors" means GTCR V, MG, the Miller Group and each of their --------- successors, and to the extent permitted to be a subsequent holder of Convertible Preferred pursuant to the Purchase Agreement, assigns. "Other Executives" means the Executives, as that term is defined in ---------------- the Purchase Agreement, other than Edmund R. Miller, each person who is subject to a Senior Management Agreement substantially similar to this Agreement so long as such person is employed by the Company. "Public Offering" means the sale in an underwritten public offering --------------- registered under the Securities Act of shares of the Company's Common Stock approved by the board of directors of the Company. "Public Sale" means any sale pursuant to a registered public offering ----------- under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "Restricted Securities Agreement" means the Restricted Securities ------------------------------- Agreement dated as of the date hereof between the Executive and the Investors, as amended from time to time. "Restricted Shares" means 150,000 shares of Common Stock purchased ----------------- under Section 1(a) hereof, which shares are subject to the Restricted Securities Agreement. -9- "Securities Act" means the Securities Act of 1933, as amended from -------------- time to time. "Stockholders Agreement" means the Stockholders Agreement dated as of ---------------------- the date hereof among the Executive, the Other Holders and the Company, as amended from time to time. "Subsidiary" means any corporation of which the Company owns ---------- securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. "Transfer" means to sell, transfer, assign, pledge or otherwise -------- dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law). "Underlying Common Stock" means, at any time, the sum of (i) the ----------------------- number of shares of Common Stock of the Company outstanding as of such time plus (ii) the number of shares of Common Stock of the Company issuable upon the exercise or conversion of the Convertible Preferred (as defined in the Purchase Agreement) at such time. 7. Notices. ------- All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the Executive and each Other Holder at the addresses indicated on the Schedule of Holders attached to the Shareholders Agreement and to the Company at the address of its corporate headquarters or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 8. General Provisions. ------------------ (a) Transfers in Violation of Agreement. Any Transfer or attempted ----------------------------------- Transfer of any Executive Stock in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Executive Stock as the owner of such stock for any purpose. (b) Severability. Whenever possible, each provision of this Agreement ------------ will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. -10- (c) Complete Agreement. This Agreement, those documents expressly ------------------ referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Executive hereby releases the Company and its affiliates and its and their predecessors from any obligation or liability the Company or any of its affiliates or its or their predecessors owes or owed to Executive or any of his affiliates and related persons prior to the date hereof. (d) Counterparts. This Agreement may be executed in separate ------------ counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (e) Successors and Assigns. Except as otherwise provided herein, this ---------------------- Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investors, the Other Executives and their respective successors and permitted assigns (including subsequent holders of Executive Stock); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Stock hereunder. (f) Choice of Law. The corporate law of the State of Florida will ------------- govern all questions concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will-be governed by and construed in accordance with the internal laws of the State of Florida (in the case of Sections 4 and 5 hereof) and Illinois (in all other cases), without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois, the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida (in the case of Sections 4 and 5 hereof) or the State of Illinois (or the State of Florida, in all other cases). (g) Remedies. Each of the parties to this Agreement (including the -------- Investors and the Other Executives) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney's fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of any of the provisions of this Agreement. (h) Amendment and Waiver. The provisions of this Agreement may be -------------------- amended and waived only with the prior written consent of at least 70% of the Company's board of directors and the Executive. (i) Business Days. If any time period for giving notice or taking ------------- action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. (j) Indemnification and Reimbursement of Payments on Behalf of ---------------------------------------------------------- Executive. The Company and its Subsidiaries shall be entitled to deduct or - - --------- withhold from any amounts owing from the Company or any of its Subsidiaries to the Executive any federal, state, local or foreign -11- withholding taxes, excise taxes, or employment taxes ("Taxes") imposed with respect to the Executive's compensation or other payments from the Company or any of its Subsidiaries or the Executive's ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock. The Executive shall indemnify the Company and its Subsidiaries for any amounts paid with respect to any such Taxes, together with any interest, penalties and related expenses thereto. (k) Termination. This Agreement (except for the provisions of Section ----------- 7(a)) shall survive the termination of Executive's employment with the Company and shall remain in full force and effect after such termination. (l) Adjustments of Numbers. All numbers set forth herein which refer ---------------------- to share prices or numbers or amounts will be appropriately adjusted to reflect stock splits, stock dividends, combinations of shares and other recapitalizations affecting the subject class of stock. * * * * * IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. ANSWERTHINK CONSULTING GROUP, INC. -12- By: /s/ Ted A. Fernandez -------------------------------------- Its: CEO ------------------------------------- /s/ Edmund R. Miller ----------------------------------------- Edmund R. Miller -13- Agreed and Accepted: GOLDER, THOMA, CRESSEY, RAUNER FUND V, L.P. By: GTCR V, L.P. Its: General Partner By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce Rauner ------------------------------- Its: Principal GATOR ASSOCIATES, LTD. By: /s/ Edmund R. Miller --------------------------------- Its: -------------------------------- TARA VENTURES, LTD. By: /s/ Edmund R. Miller --------------------------------- Its: -------------------------------- MG CAPITAL PARTNERS II, L.P. By: MG Capital Corp. --------------------------------- Its: General Partner -------------------------------- By: [SIGNATURE APPEARS HERE] --------------------------------- Its: Managing Director -------------------------------- -14- EX-10.15 9 EXHIBIT 10.15 EXHIBIT 10.15 EMPLOYMENT AGREEMENT (Restricted Stock Holder) THIS EMPLOYMENT AGREEMENT (the "Employment Agreement") is made as of July 22, 1997, between AnswerThink Consulting Group, Inc., a Florida corporation (the "Company"), and Luis San Miguel ("Employee"). 1. Employment. The Company agrees to employ Employee and Employee ----------- accepts such employment for the period beginning as of the date hereof and ending upon the earlier of three years(s) from the date hereof (or such later date as agreed by Employee and the Company) and termination pursuant to Section 1(b) hereof (the "Employment Period"). (a) Salary, Bonus and Benefits. During the Employment Period, the --------------------------- Company will pay Employee a base salary (the "Annual Base Salary") as the Board of Directors of the Company (the "Board") may designate from time to time, at the rate of not less than $175,000 per annum during each of the first three years of the Employment Period. Employee may also be eligible to earn a bonus pursuant to a bonus plan adopted by the Board for each fiscal year. Employee's Annual Base Salary for any partial year will be prorated based upon the number of days elapsed in such year. In addition, during the Employment Period, Employee will be entitled to such other benefits approved by the Board and made available to employees. (b) Termination. The Employment Period will continue until ------------ Employee's resignation, disability (as determined by the Board in its good faith judgment) or death or until the Board determines in its good faith judgment that termination of Employee's employment is in the best interests of the Company. If Employee's employment is terminated by the Company without Cause, during the period commencing on the date of termination and ending 6 months thereafter, the Company shall pay Employee regular salary payments based upon Employee's Annual Base Salary ("Severance Payments"). If Employee terminates employment with the Company for any reason, Employee shall be required to give Company written notice of the proposed termination ("Termination Notice") at least 6 months prior to the termination date. From the date the Company receives such Termination Notice until the termination date, Employee shall be obligated by the terms hereunder. Notwithstanding the foregoing, upon receiving the Termination Notice, Employer shall have absolute discretion to accelerate Employee's date of termination as deemed appropriate by the Company. In the event that Employee shall not provide Termination Notice in accordance with the time requirements set forth herein, Employee shall be responsible for all losses incurred by the Company as a result thereof. Notwithstanding the foregoing and without in any way modifying the provisions of Section 3 hereof, from and after the first date that Employee becomes employed with another Person, the Company, at its option, may eliminate or otherwise reduce the amount of Severance Payments otherwise required to be made pursuant to this Section 1(b). (c) Participation in Restricted Stock Plan. In connection with the --------------------------------------- execution of this Employment Agreement, Employee shall purchase a certain number of shares of the 1 Company's Common Stock, such shares being subject to restrictions set forth in the Employee's Restricted Stock Agreement and the Company's Restricted Stock Plan (the "Plan"). 2. Confidential Information. ------------------------ (a) Employee acknowledges that the information, observations and data obtained by such Employee concerning the business and affairs of the Company and its affiliates and their predecessors during the course of Employee's performance of services for, or employment with, any of the foregoing persons (whether or not compensated for such services) are the property of the Company and its affiliates, including information concerning acquisition opportunities in or reasonably related to the Company's business or industry of which Employee becomes aware during such period. Therefore, Employee agrees that Employee will not at any time (whether during or after the Employment Period) disclose to any unauthorized person or, directly or indirectly, use for Employee's own account, any of such information, observations or data without the Board's consent, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Employee's acts or omissions to act or the acts or omissions to act of other senior or junior management employees of the Company. Employee agrees to deliver to the Company at the termination of Employee's employment, or at any other time the Company may request in writing (whether during or after the Employment Period), all memoranda, notes, plans, records, reports and other documents, regardless of the format or media (and copies thereof), relating to the business of the Company and its affiliates and their predecessors (including, without limitation, all acquisition prospects, lists and contact information) which Employee may then possess or have under Employee's control. (b) Inventions and Patents. Employee acknowledges that all ---------------------- inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) that relate to the Company's actual or anticipated business, research and development or existing or future products or services and that are conceived, developed, made or reduced to practice by Employee while employed by the Company or any of its predecessors ("Work Product") belong to the Company and Employee hereby assigns, and agrees to assign, all of the above to the Company. Any copyrightable work prepared in whole or in part by Employee in the course of Employee's work for any of the foregoing entities shall be deemed a "work made for hire" under the copyright laws, and the Company shall own all rights therein. To the extent that any such copyrightable work is not a "work made for hire," Employee hereby assigns and agrees to assign to Company all right, title and interest, including without limitation, copyright in and to such copyrightable work. Employee shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the Company's ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 2 3. Noncompetition and Nonsolicitation. ---------------------------------- (a) Noncompetition. Employee acknowledges that during the course of -------------- Employee's employment with the Company, Employee will become familiar with the Company's and its affiliates' trade secrets and with other confidential information concerning the Company and its affiliates and that Employee's services will be of special, unique and extraordinary value to the Company and that the Company's ability to accomplish its purposes and to successfully pursue its business plan and compete in the marketplace depend substantially on the skills and expertise of Employee. Therefore, and in further consideration of the compensation being paid to Employee hereunder, Employee agrees that, during the Employment Period (the "Noncompete Period"), Employee shall not directly or indirectly own, manage, control participate in, consult with, render services for, or in any manner engage in any business competing with the businesses of the Company, or any business in which the Company has commenced negotiations or has requested and received information relating to the acquisition of such business within eighteen months prior to the termination of the Employee's employment with the Company, in any country where the Company or other aforementioned business conducts business. (b) Nonsolicitation. During the time period following Termination --------------- until six months thereafter, Employee shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way willfully interfere with the relationship between the Company and any employee thereof (ii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company to cease doing business with the Company or in any way interfere with the relationship between any such customer, supplier, licensee or business relationship and the Company or (iii) initiate or engage in any discussions regarding an acquisition of, or Employee's employment (whether as an employee, an independent contractor or otherwise) by, any businesses in which the Company has entertained discussions or has requested and received information relating to the acquisition of such business by the Company upon or within the 18 month period prior to the termination of the Employee's employment with the Company. (c) Enforcement. If, at the time of enforcement of Section 2 or 3 of ----------- this Employment Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Because Employee's services are unique and because Employee has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of any provision of this Employment Agreement. Therefore, in the event a breach or threatened breach of any provision of this Employment Agreement, the Company may, in addition to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). 3 4. Choice of Law. The corporate law of the State of Florida will ------------- govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Employment Agreement hereto will be governed by and construed in accordance with the laws of the State of Florida without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. 5. Amendment and Waiver. The provisions of this Employment Agreement -------------------- may be amended and waived only with the prior written consent of at least 70% of the Company's Board and the Employee. 6. Severability. Whenever possible, each provision of this Employment ------------ Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Employment Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Employment Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 7. Complete Agreement. This Employment Agreement, those agreements and ------------------ documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Employee hereby releases the Company and its affiliates and its and their predecessors from any obligation or liability the Company or any of its affiliates or its or their predecessors owes or owed to Employee or any of his affiliates and related persons prior to the date hereof. 8. Successors and Assigns. Except as otherwise provided herein, this ---------------------- Employment Agreement shall bind and inure to the benefit of and be enforceable by Employee and the Company and their respective successors and permitted assigns. 9. Indemnification and Reimbursement of Payments on Behalf of ---------------------------------------------------------- Employee. The Company shall be entitled to deduct or withhold from any amounts - - -------- owing from the Company to the Employee any federal, state, local or foreign withholding taxes, excise taxes, or employment taxes ("Taxes") imposed with respect to the Employee's compensation or other payments from the Company or the Employee's ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock. The Employee shall indemnify the Company for any amounts paid with respect to any such Taxes, together with any interest, penalties and related expenses thereto. 4 10. Definitions. For purposes of this Employment Agreement, the following ----------- terms used herein shall have the following meanings, unless a different meaning is clearly required by the context. (a) "Cause" shall mean (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to the Company or any of their customers or suppliers, (ii) conduct tending to bring the Company into substantial public disgrace or disrepute, (iii) substantial and repeated failure to perform duties of the office held by Employee as reasonably directed by the Board and such failure is not cured within 30 days after Employee receives notice thereof from the Board, (iv) gross negligence or willful misconduct with respect to the Company or (v) any breach of Sections 2 or 3 of this Employment Agreement. (b) "Common Stock" shall mean the Company's Common Stock, par value $0.01 per share. (c) "Company" shall refer to AnswerThink Consulting Group, Inc. and any Subsidiaries, successors in interest, or assigns thereto. (d) "Effective Date" shall mean the date on which this Employment Agreement was executed by the undersigned parties. (e) "Person" means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, and a government entity or any department, agency or political subdivision thereof. (f) "Subsidiary" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the Board directly or through one or more subsidiaries. 5 IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement on the date first written above. ANSWERTHINK CONSULTING GROUP, INC. By: /s/ Ted A. Fernandez --------------------------------- Ted A. Fernandez, Chief Executive Officer and President Agreed and Accepted: By: /s/ Luis San Miguel ----------------------------- Luis San Miguel 13150 S.W. 106th St. Miami, Fl 33186 6 EX-10.16 10 EXHIBIT 10.16 EXHIBIT 10.16 RESTRICTED STOCK AGREEMENT THE RESTRICTED STOCK AGREEMENT (the "RESTRICTED STOCK AGREEMENT") is made as of July 22, 1997, between AnswerThink Consulting Group, Inc., a Florida corporation (the "COMPANY"), and Luis E. San Miguel ("HOLDER"). 1. SALE OF SHARES. The Company agrees to sell Holder 320,000 -------------- shares of the Company's common stock, par value $.01 per share (the "COMMON STOCK"), at a price of $.0025 per share (the "PURCHASE PRICE"), such shares being issued pursuant to and subject to the restrictions described in the Restricted Stock Plan (the "PLAN"). The Holder hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all of the terms and conditions herein and therein. All of such shares of Common Stock purchased by Holder under this Restricted Stock Agreement are subject to such restrictions under the Restricted Stock Plan and are referred to herein and therein as "RESTRICTED SHARES." 2. CERTIFICATES. Upon each Holder's purchase of Restricted Shares, ------------ the Company will deliver to Holder the certificates representing such Restricted Shares, and Holder will deliver to the Company a check or wire transfer of funds in the aggregate amount of the Purchase Price. 3. TAX ELECTION. Within 30 days after Holder purchases Restricted ------------ Shares, Holder will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form attached hereto. 4. REPRESENTATIONS. In connection with the purchase and sale of the --------------- Restricted Shares hereunder, Holder represents and warrants to the Company that: (i) The Restricted Shares to be acquired by Holder pursuant to this Restricted Stock Agreement will be acquired for Holders own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any applicable state securities laws, and the Restricted Shares will not be disposed of in contravention of the Securities Act or any applicable state securities laws. (ii) Holder is a sophisticated investor for purposes of applicable foreign and U.S. federal and state securities laws and regulations and is able to evaluate the risks and benefits of the investment in the Restricted Shares. (iii) Holder is able to bear the economic risk of such Holder's investment in the Restricted Shares for an indefinite period of time because the Restricted Shares have not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. (iv) Holder has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Restricted Shares and has had full access to such other information concerning the Company as such Holder has requested. (v) This Restricted Stock Agreement constitutes the legal, valid and binding obligation of Holder, enforceable in accordance with its terms, and the execution, delivery and performance of this Restricted Stock Agreement and such other agreements by Holder does not and, to the knowledge of Holder, will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Holder is a party (including, but not limited to, any agreement referred to in clause (vi) below) or any judgment, order or decree to which Holder is subject and Holder further represents and warrants that Holder believes that Holder is not now in breach of any such agreement, contract or instrument to which Holder is a party. (vi) Holder is not a party to or bound by ,any other employment agreement, noncompete agreement or confidentiality agreement that would be breached by such Holder's relationship with the Company. 5. VESTING OF RESTRICTED SHARES. ---------------------------- (a) Except as otherwise provided in Sections 5(b) and (c) below, all of the Restricted Shares purchased pursuant to the Plan (the "TIME VESTING COMMON STOCK") will become vested only in accordance with the following schedule (the "VESTING SCHEDULE") and as long as such Holder is still employed by the Company as of each dated indicated:
Cumulative Percentage of Date Restricted Shares to be Vested ---- ------------------------------ "TIER I" 2nd Anniversary of the date of purchase 50% 3rd Anniversary of the date of purchase 75% 4th Anniversary of the date of purchase 100% "TIER II" 3rd Anniversary of the date of purchase 50% 4th Anniversary of the date of purchase 75% 5th Anniversary of the date of purchase 100% "TIER III" 4th Anniversary of the date of purchase 50% 5th Anniversary of the date of purchase 75% 6th Anniversary of the date of purchase 100%
-2- FIFTY PERCENT (50%), TWENTY-FIVE PERCENT (25%), AND TWENTY-FIVE PERCENT (25%) OF THE TOTAL AMOUNT OF RESTRICTED SHARES PURCHASED HEREUNDER SHALL BE SUBJECT TO TIER I, TIER II, AND TIER III, RESPECTIVELY. (b) Immediately prior to the occurrence of a Sale of the Company, if as of such time Holder is still employed by the Company, all Restricted Shares which have not yet become vested shall be deemed vested at the time of such event. (c) If the Holder's employment with the Company is terminated without Cause, shares which are Unvested Restricted Shares shall become Vested Restricted Shares as of the date of termination of employment in an amount equal to the daily pro rata share to be vested in accordance with the above Vesting Schedule, with a minimum amount equal to 50% of the Restricted Shares to be Vested on the fourth Anniversary of the date of purchase. "CAUSE" shall mean (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to the Company or any of their customers or suppliers, (ii) conduct tending to bring the Company into substantial public disgrace or disrepute, (iii) substantial and repeated failure to perform duties of the office held by Employee as reasonably directed by the Board and such failure is not cured within 30 days after Employee received notice thereof from the Board, (iv) gross negligence or willful misconduct with respect to the Company or (v) any breach of Sections 10 or 11 of this Plan. (d) All Restricted Shares, whether vested or unvested, shall be deemed outstanding shares of Common Stock and the Holder thereof shall have all rights with respect thereto as set forth in the Articles of Incorporation and By-laws of the Company and under applicable laws of the State of Florida. 6. EFFECT ON EMPLOYMENT RELATIONSHIP. As an inducement to the --------------------------------- Company to issue the Restricted Shares to Holder, and as a condition thereto, Holder acknowledges and agrees that neither the issuance of the Restricted Shares to Holder nor any provision contained herein shall entitle Holder to remain in the employment of the Company. 7. DEFINED TERMS. Certain definitions are set forth in Section 2 of ------------- the Plan and, where applicable, are incorporated by reference herein. 8. CHOICE OF LAW. The corporate law of the State of Florida will ------------- govern all questions concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity and interpretation of this Restricted Stock Agreement hereto will be governed by and construed in accordance with the laws of the State of Florida without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida 9. AMENDMENT AND WAIVER. The provisions of this Restricted Stock -------------------- Agreement may be amended and waived only with the prior written consent of the Company and the Holder. -3- 10. SEVERABILITY. Whenever possible, each provision of this ------------ Restricted Stock Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Restricted Stock Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Restricted Stock Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained, herein. 11. COMPLETE AGREEMENT. This Restricted Stock Agreement and those ------------------ agreements and documents expressly referred to herein embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Holder hereby releases the Company and its affiliates and its and their predecessors from any obligation or liability the Company or any of its affiliates or its or their predecessors owes or owed to Holder or any of his affiliates and related persons prior to the date hereof. 12. INTERPRETATION. The Holder accepts this Restricted Stock -------------- Agreement subject to all the terms and provisions of the Plan and this Restricted Stock Agreement. The undersigned Holder hereby accepts as binding, conclusive and final all decisions or interpretations of the Board of Directors of the Company upon any questions arising under the Plan and this Restricted Stock Agreement. -4- IN WITNESS WHEREOF, the parties hereto have executed this Restricted Stock Agreement on the date first written above. ANSWER THINK CONSULTING GROUP, INC. By: /s/ Ted A. Fernandez -------------------------------------- Ted A. Fernandez Chief Executive Officer and President Agreed and Accepted: By: /s/ Luis E. San Miguel ------------------------------- Luis E. San Miguel -5- EX-21.1 11 EXHIBIT 21.1 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT Name Jurisdiction of Incorporation - - ---- ----------------------------- The Hackett Group, Inc. Ohio Delphi Partners, Inc. New Jersey EX-23.1 12 EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-1 of our report dated March 12, 1998, on our audit of the consolidated financial statements of AnswerThink Consulting Group, Inc. We also consent to the references to our firm under the caption "Experts" and "Selected Financial Data." Coopers & Lybrand L.L.P. Miami, Florida March 17, 1998 EX-23.2 13 EXHIBIT 23.2 Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-1 of our reports dated February 27, 1998, on our audits of the financial statements of Delphi Partners, Inc., The Hackett Group, Inc., and Relational Technologies, Inc. We also consent to the references to our firm under the captions "Experts" and "Selected Financial Data." Coopers & Lybrand L.L.P. Miami, Florida March 17, 1998 EX-27.1 14 EXHIBIT 27.1
5 OTHER JAN-02-1998 APR-23-1997 JAN-02-1998 3,173,262 0 10,157,720 0 0 13,743,370 2,732,951 237,656 28,649,645 5,563,546 0 10,040,196 0 46,757 799,146 28,649,645 0 14,848,172 0 23,321,087 4,000,000 0 (115,555) (12,090,452) 0 0 0 0 0 (12,090,452) (0.95) (0.95)
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