UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO ________
COMMISSION FILE NUMBER 0-24343
ANSWERTHINK, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0750100
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1001 BRICKELL BAY DRIVE, SUITE 3000
MIAMI, FLORIDA 33131
(Address of principal executive offices) (Zip Code)
(305) 375-8005
(Registrant's telephone number, including area code)
|
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.001 per share
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the 46,839,761 shares of Common Stock of the Registrant issued and outstanding as of March 15, 2002, excluding 2,949,318 shares of Common Stock held by affiliates of the Registrant, was $300,210,630. This amount is based on the average bid and asked price of the Common Stock on the Nasdaq Stock Market of $6.84 per share on March 15, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of the Form 10-K incorporates by reference certain portions of the Registrant's proxy statement for its 2002 annual meeting of stockholders to be filed with the Commission not later than 120 days after the end of the fiscal year covered by this report.
ANSWERTHINK, INC.
FORM 10-K
TABLE OF CONTENTS
Page
PART I
ITEM 1. Business 3
ITEM 2. Properties 16
ITEM 3. Legal Proceedings 16
ITEM 4. Submission of Matters to a Vote of Security Holders 17
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters 17
ITEM 6. Selected Consolidated Financial Data 18
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 19
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk 24
ITEM 8. Financial Statements and Supplementary Data 25
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 47
PART III
ITEM 10. Directors and Executive Officers of the Registrant 47
ITEM 11. Executive Compensation 47
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 47
ITEM 13. Certain Relationships and Related Transactions 47
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 47
Signatures 48
Index to Exhibits 49
|
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and the information incorporated by reference in it include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our industry are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that impact such forward looking statements include, among others, our ability to attract additional business, the timing of projects and the potential for contract cancellation by our customers, changes in expectations regarding the information technology industry, our ability to attract and retain skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, changes in general economic conditions and interest rates. An additional description of our risk factors is described in Part 1 - Item 1 "Business - Risk Factors". We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
PART I
ITEM 1. BUSINESS
GENERAL
INDUSTRY BACKGROUND
Last year proved to be a very difficult year for systems integration, information technology ("IT") services and consulting firms. According to Gartner Dataquest, such companies "were among the most negatively affected by the economic slowdown in North America." Sales activity slowed and new business was difficult to close. Customers sought to maximize the value of existing business and IT assets and to cut costs.
The recent economic downturn follows 10 years of unprecedented economic growth and pervasive optimism, which led many companies to invest heavily in IT. Because of pressures to acquire new customers and grow market share, IT spending occurred throughout business organizations. This rapid IT growth led to redundant and overlapping investments and incompatible "silos" of information and systems. Disparate parts of the organization gathered valuable information, but never integrated or leveraged it for improved decision-making. Y2K fears led to hurried implementations of application packages. Hoping to capitalize on the e-commerce explosion, companies adopted a "just launch something" mentality that resulted in the development of experimental and speculative sites not linked to corporate strategies or operations. These forces resulted in many companies failing to realize their expected return on IT investments.
Now that the economy has slowed, companies have returned their focus to fundamentals like increasing revenue, decreasing costs and demanding tangible returns on all investments. They are focusing on core competencies and outsourcing non-essential services. IT priorities are being re-assessed against core strategies and IT spending centralized. Instead of large new initiatives or implementations, leading companies are integrating "siloed" systems and seeking to realize full value from past investments by adding complementary functionality, like analytics and knowledge management. Chief information officers are focused on developing an integrated, extended technical and information architecture that enables business
growth as well as radical gains in communication, collaboration, productivity and decision-making, both inside and outside the enterprise.
There is growing optimism about the state of the global economy. Many observers predict a recovery in the United States this coming year, which should favorably impact IT spending trends. We are optimistic about Answerthink's prospects, as the market continues to gravitate toward the types of services we offer. The needs companies have today -- to maximize value from IT investments, for instance - directly align with the greatest strengths of our business model.
OUR APPROACH
Answerthink delivers high-value solutions and superior results to clients by addressing business issues holistically and by optimizing the four key dimensions of business infrastructure: people, process, technology and information. We call this approach Business Process Intelligence, or "BPI."
BPI and the renowned best practices data of our Hackett Best Practices group drive every solution we provide to clients. Hackett Best Practices group owns and continuously updates the world's most comprehensive database of best practices information on business processes for finance, human resources, information technology, procurement, contact centers and global shared services. This empirical data, compiled over ten years of comprehensive research, gives Answerthink a unique ability to quickly and credibly assess an organization's Process IQ and to design and implement the process, organizational, technology and information enhancements that lead to breakthrough performance gains. Increased efficiency and reduced costs are two important benefits, but we go further, delivering improvements in analysis, decision-making, communication, collaboration, adaptability, innovation, flexibility, agility and productivity across the enterprise.
Best practices influence everything we do for clients. When we configure, install and integrate packaged business applications, for instance, our knowledge of world-class practices helps ensure that companies realize the full promise of the technology. Typically, companies receive only one-third of the potential value of IT investments because their processes are too complex, costly and time-consuming. Lack of standardization, inconsistent policies, redundant tools, errors in data capture, poorly integrated systems, lack of training and manual sourcing of data are other factors leading to poor return on investment ("ROI") in technology. Using our BPI approach, our people optimize the workflow functionality imbedded in the software by using Hackett Best Practice requirements to drive the configuration. This approach also helps clients optimize the packaged software while limiting customization. Workflow is simplified and automated - which leads to increased quality and productivity and decreased cost and cycle times. Ultimately, technology and process work together to support core objectives. We work to ensure that features and functionality are fully utilized and end-users are ready to embrace new or upgraded systems. This combination of best practices and best-of-breed applications leads to increased ROI from technology and allows companies to focus their people on high-value business activities.
Similarly, best practices can be used to ensure that information technology makes people more intelligent and effective. Today's workers perform many different functions and intersect with many different processes. They interact with customers, suppliers, partners and co-workers in ways that were unthinkable just a few years ago. Each of these connection points represents an opportunity to add value. For companies to become more innovative and improve service levels, workers need a place to connect with all the people, information and processes they need to do their jobs. In this role-based world, companies can use portals to create customized work environments that integrate data and extend the workflow capabilities of enterprise resource planning (ERP) systems, allowing their people to work smarter and more productively. Hence, companies realize more value from information technology investments. We implement enterprise portals to aggregate critical data and services from disparate systems across the enterprise and promote enhanced collaboration and communication.
Most people and processes require data from multiple systems to work effectively, so companies must also integrate their enterprise applications within a unified technology and information architecture. While portals provide the interface layer, an integrated architecture is necessary to allow people to tap into the information they need to do their jobs. Only with such an architecture in place can workers use improved reporting to make better decisions faster and leverage advanced communication tools to strengthen bonds with customers and partners.
Answerthink uses Hackett Best Practices data and our proven BPI approach to make people more effective, information more accessible, business processes more intelligent, and to create unified technology and information architectures that enable improved analysis, decision-making, communication and productivity. This is the way we deliver value to clients and, we believe, the best way for companies to achieve outstanding ROI.
STRATEGY
Our goal is to generate superior value and sustainable competitive advantage for clients by leveraging our best practice intellectual capital, multidisciplinary teams, integrated methodology and collaborative work style. In this way, we help clients unlock the full business value of technology. Our strategy is based on the following:
. Leverage and Expand Our Unique Intellectual Capital
Intellectual capital and thought leadership are at the heart of Answerthink's strategy and competitive differentiation. More than any other factor, the value we provide to clients is determined by the collective knowledge and experience of our people and our ability to apply that knowledge and experience to solve client problems. The comprehensive empirical data owned and managed by Hackett Best Practices is evidence of our industry leadership and competitive advantage in this area. Further, our innovative BPI approach demonstrates how we convert our intellectual capital to an effective client service model.
Mind~Share, Answerthink's own award-winning knowledge management portal, has proven the value of our BPI approach. It links together our associates, customers and partners by integrating back-end data, processes and systems. It makes our processes more intelligent by informing them with the right data. It makes our people more productive by giving them personalized access, based on the roles they play, to the information, tools and services they need to do their jobs effectively.
In order to leverage this advantage, we must continue to build and evolve our intellectual capital to stay ahead of the business and technology forces affecting our clients. And we must ensure that our teams have the tools they need to access and apply knowledge. In 2002, we will continue to expand and refine Mind~Share. Last year, we further developed the portal capabilities of Mind~Share, and it plays an increasingly vital role in our collaborative workstyle. We use Mind~Share for client portals that assist in pre-sales activities and support client relationship management. Our project teams create portals for document sharing, project collaboration and resource management. For alliance partners, who are an important part of our business development strategy, we use Mind~Share portals as a collaborative tool for opportunity management.
. Focus on our Top 35 Accounts
The primary emphasis of our 2002 business development strategy is a greater penetration of our top 35 accounts. These are our largest and most strategic prospects and clients. To strengthen our relationships with these companies, we've assigned client relationship executives, account managers and solution strategists to coordinate and intensify our sales efforts in key areas of the organization.
. Enhance Skill Sets
Since our formation, we have expanded our skill sets and geographic presence through a combination of internal growth and strategic acquisitions. We have successfully completed and integrated eleven mergers and acquisitions and now maintain offices in 14 cities in the United States and Europe. We believe our broad geographic coverage allows us to serve our clients on a local basis, helping us to build strong, long-term client relationships. Our strategy is to continue to enhance our skill sets to meet evolving market demand through internal growth and targeted acquisitions of businesses that are aligned with our strategy and culture.
Two new skill sets we plan to offer clients in 2002 are off-shore application development and maintenance services and business process outsourcing. Our joint venture with HCL Technologies, Limited ("HCL"), an off-shore application development organization based in India, is expected to bring us a significant new source of revenue, giving us a competitive edge in the rapidly growing off-shore development market segment. Given our skill sets and cost structure, we have historically not participated in business opportunities that require the leverage of low cost resources. Our joint venture with HCL will now allow us to leverage low cost resources from HCL to provide our customers with off-shore custom development services, on-going production support, application maintenance services and application reporting services.
Outsourcing has also become increasingly popular in the last several years as organizations look for new ways to reduce costs. We expect to take advantage of this demand by aligning with a major outsourcing provider to assist in the design and implementation of outsourced business processes for new and existing clients. We are well-qualified in this area because of the benchmarking and best practices information we can bring to the table for key business functions like finance and human resources. We expect to participate by providing performance targets and the strategic planning for outsourcing and/or shared service operations, as well as follow-on consulting services to ensure clients realize full value from their outsourcing initiatives.
Our Hackett Best Practices group continues to upgrade its offerings as well. By acquiring Exult Process Intelligence Center (EPIC), we have expanded our range of best practices management tools and techniques with subscription-based communities devoted to global shared services, accounts payable, accounts receivable, travel and expenses, payroll and general ledger. The new service, named Hackett Collaborative Learning, offers opportunities for networking and group learning through regularly scheduled Webcasts and conferences, plus access to an online library of best practices metrics and white papers.
. Extend Strategic Relationships
We actively target, assess and develop relationships with industry leaders to stay at the leading edge of business thought and technology, to develop new business and to generate additional revenue. These relationships generate sales opportunities as well as provide us access to early product releases and technology enhancements. Such alliances, including those with software and services firms, have greatly aided our success in the past and we will continue to pursue them.
THE ANSWERTHINK SOLUTION
Answerthink offers a comprehensive range of services, including best practices benchmarking, business transformation, enterprise business applications, technology integration and interactive direct marketing. With strategic and functional knowledge in customer service, sales and marketing, finance, human resources, information technology and supply chain management, Answerthink's expertise extends across the entire enterprise. We have completed successful engagements in a variety of industries, including retail, consumer goods, financial services, life sciences, telecommunications, utilities, transportation, high tech, automotive, media and entertainment, and manufacturing.
SERVICE CAPABILITIES
. Best Practices
Answerthink's Hackett Best Practices group is considered the world's foremost best practices organization. Since 1988, Hackett has identified best practices and evaluated the efficiency and effectiveness of staff functions at nearly 2,000 global organizations. Benchmark participants include 80 percent of the Dow Jones Industrials, two-thirds of the Fortune 100, and nearly 60 percent of the Dow Jones Global Titans Index. Ongoing benchmarking capabilities include studies in a wide range of areas, including finance, human resources, information technology, procurement, customer contact centers, SG&A expenses, shared service centers and strategic decision-making. Hackett uses proprietary Web-delivered benchmark tools and a data-collection model that enable companies to complete the benchmark cycle and identify and quantify improvement opportunities in as little as four weeks. Additionally, Hackett Collaborative Learning, acquired in early 2002, offers subscription-based benchmarking, group learning opportunities and access to an online library of best practices data from over 2000 companies on shared services and core business processes such as accounts payable, accounts receivable, travel and expense, payroll and general ledger.
. Business Transformation
Answerthink's Business Transformation services help clients transform processes and operations in accordance with industry best practices to achieve core business objectives in specific functional areas, including customer relationship management ("CRM"), finance, supply chain, IT business strategy and human resources. Our expert teams address fundamental business issues associated with strategic and operational planning, process and organization design, change management and leadership, and the effective application of business technology. We combine our world-leading benchmarking and best practices resources with deep business expertise and broad technology capabilities to deliver solutions that maximize the investments our clients have made in people, processes, technology and information.
. Business Applications
The backbone of today's large, complex business environments continues to be packaged software applications -- applications that run mission-critical operations, such as CRM, finance, human resources, payroll and supply chain functions. Our Business Applications professionals help clients choose, integrate and customize the software applications that best meet our clients' needs. We offer complete services, from architecture, planning and vendor selection through implementation, customization, testing and deployment. We also offer post-implementation support services, such as change management, system documentation and end-user training. This combined service offering leads to enhanced return on investment. Additionally, our people are experienced with leading vendors, including Oracle, PeopleSoft, SAP, Siebel, i2 and other application providers.
. Technology Integration
Our Technology Integration group offers a broad array of innovative services that transform technology into tools that clients can use to achieve specific business objectives. We assist clients by evaluating, designing, building and integrating applications that help maximize ROI on current and past technology investments. Our capabilities include custom application development, enterprise application integration, mobile computing, Web services, content management, portal development, business intelligence, knowledge management and interactive direct marketing services. Our business intelligence experts help companies provide access to better information faster, enabling improved strategic decision-making. Our interactive direct marketing group creates measurable business value for clients by developing relationship-oriented communications in all forms of i-media and delivering powerful, customer-focused, technology-enabled creative online content. Our many industry awards, including seven Web marketing association awards, are clear testament to our online branding and user experience knowledge and skills.
SOLUTION OFFERINGS
. Customer Relationship Management
Answerthink has helped some of the world's most successful companies
understand and use CRM techniques and technology to grow revenue through the identification, acquisition and retention of profitable customers across all channels and touch-points (direct sales force, Internet, broadcast, direct mail, call centers, storefronts, wireless, etc.). Our CRM experts possess a powerful combination of CRM knowledge (brand strategy, sales optimization and contact center effectiveness) and technology expertise that helps companies maximize CRM investments. We use our deep insight about how top companies market, sell to and serve their customers to address each element of the customer experience and lifecycle. Our comprehensive approach allows us to take a multidimensional view and create solutions tailored to our clients' industries, organizations and brands.
. Finance
Answerthink's Finance Solutions professionals are the trusted advisors to our clients' chief financial officers, controllers and chief information officers. From fixed vs. variable cost structures, e-business performance measurement, budgeting and forecasting effectiveness and merger and acquisition support, we understand the issues they face when seeking to improve financial operations. We help them rapidly identify and implement leading edge best practices that result in breakthrough performance gains in efficiency and effectiveness. Our solutions are based on our extensive understanding of finance functions -- from planning and reporting to shared services and asset management -- and enable timely access to information, align the finance function with strategic goals and ensure cost optimization.
. Human Resources
World-class organizations take a comprehensive approach to human resources, creating strategic initiatives linked to core business objectives. Answerthink's human resources solutions leverage our vast knowledge of human resources best practices at Fortune 500 companies to design solutions that help clients optimize operations and technology, as well as maximize employee productivity and organizational effectiveness. We identify business requirements, develop best practice strategies and implement programs to increase efficiency, employee satisfaction and ultimately shareholder value. We help human resources organizations develop strategic plans, more efficiently use data and improve services while controlling costs.
. Information Technology
Answerthink's IT Business Strategy team helps today's companies execute business strategies to improve bottom-line benefits and derive the highest levels of value from information technology investments. Our IT business strategists help clients ensure the accurate alignment of business strategy and IT capabilities. Focusing on leading edge technologies, our teams help clients build the IT and e-business strategies to enable sustained business growth. Our enterprise architecture strategists focus on architecture design and integration, business continuity and recovery planning, and security/privacy assessment. Our IT consultants help clients manage and improve IT operations through organizational design, IT services and process analysis, measurement programs and sourcing strategies. Overall, our teams help executives strike the appropriate balance between supporting existing business and enabling new strategic capabilities.
. Supply Chain Management
Our Supply Chain Solutions team works with senior client executives to optimize vendor and client relationships, procurement practices, operational efficiencies and sourcing strategies. Our approach is built on a vision of the "integrated value chain" and the synchronization of key processes, information and applications throughout the entire supply chain. We offer a combination of business transformation, and strategy services, as well as supply chain technology expertise, including enterprise application integration with back-end and partner systems, e-collaboration and wireless. We address all of the functions that impact supply chain performance, including sales force automation, order management and configuration, planning and scheduling, manufacturing execution, logistics and customer management.
JOINT VENTURE
HCL-ANSWERTHINK
We have agreed to form a joint venture ("HCL-Answerthink") with HCL Technologies, Limited, a leading global IT services and product engineering company. This joint venture will enable us to offer clients off-shore application and software development and maintenance services. HCL-Answerthink allows us to extend our offerings and gain a competitive edge in this growing market segment. In the past, we have not participated in this market given our skill sets and cost structure. Opening a new revenue stream, HCL-Answerthink combines our skills in business strategy and transformation, business applications, technology integration and interactive direct marketing with HCL Technologies' deep capabilities in technology development, software and application engineering and networking. HCL-Answerthink will be able to offer cost-effective custom application and system development services, ongoing application support and application reporting services.
CLIENTS
Answerthink focuses on long-term client relationships with Global 2000 firms and other sophisticated buyers of business consulting and IT services. During 2001, our ten most significant clients accounted for approximately 51% of revenues, and two clients, Waste Management and Verizon, each had revenues greater than 5% of total net revenues. In the aggregate, these two clients accounted for approximately 30% of total net revenues. Other key clients during 2001 included Exelon (Unicom/PECO), cpa2biz, Inc., Fannie Mae and The McGraw Hill Companies.
The continuing high level of satisfaction across our client base offers more evidence of our success in 2001. The responses to the surveys we send to every client continue to be extremely positive. The direct feedback and suggestions we receive on surveys are captured and used to continuously improve our delivery execution, sales processes, methodologies and training. Additionally, we have tied our client satisfaction results directly to a project bonus program for our associates.
BUSINESS DEVELOPMENT AND MARKETING
Our extensive client base and relationships with Global 2000 firms are our most significant sources of new business. Our revenue generation strategy is formulated to ensure we are addressing the multiple facets of business development. The categories below define our business development resources and market segmentation.
BUSINESS DEVELOPMENT RESOURCES
Although virtually all of our consultants have a responsibility to impact revenue, our primary internal business development resources are comprised of the following:
. The Leadership Team
. The Sales Organization
. The Solution Strategist Network
. Telemarketing
. The Delivery Organization
The Leadership Team is comprised of the senior leaders within Answerthink who have one or a combination of executive, functional, practice and anchor account responsibilities. In addition to their management responsibilities, this group of associates is responsible for growing business by fostering executive level relationships within accounts and leveraging their existing contacts in the marketplace.
The Sales Organization is comprised of associates who are 100% dedicated to increasing revenue. They are deployed geographically in key markets and are primarily focused on developing new account relationships within their target accounts. Each associate has between two and ten target accounts, split between existing clients and select Global 2000 prospects. They represent the entire Answerthink offering. They also handle geographic-related opportunities as they arise.
The Solution Strategist Network is comprised of associates throughout our various practices who are at least 80 percent dedicated to developing business. Solution strategists possess deep subject matter expertise within a specific discipline and are incented on the amount of revenue they generate. Solution strategists sell new business in geographic accounts and collaborate with the sales organization on target account opportunities to provide content expertise. In addition to our practice-centric solution strategists, a team of "enterprise solution strategists" are in place that specialize in large, enterprise-wide, cross-functional opportunities.
Telemarketing. Answerthink has trained groups of telemarketers to be conversant in its various solution areas. Telemarketing is coordinated to ensure that our inbound and outbound efforts are synchronized.
The Delivery Organization is comprised of our billable associates who work at client locations. Their job is to find additional opportunities through their normal course of delivering existing projects, thereby helping us expand our business within existing accounts.
In addition to our business development team, we have a corporate marketing and communications organization responsible for overseeing Answerthink's marketing programs, public relations and employee communications activities. Our Business Process Intelligence approach will form the main thrust of our market message in 2002. It will be our defining voice and differentiating point of view in the marketplace. In the second quarter, we plan to launch the BPI message formally to clients through a variety of communications initiatives, including collateral, white papers, a series of executive breakfasts and Webcasts. We also plan to be aggressive in taking the BPI story to top business media and analysts who cover our industry.
Awards we have won demonstrate to the market the expertise of Answerthink people and the depth and breadth of our intellectual capital. Such awards help to support business development and maximize awareness of the Answerthink brand.
MARKET SEGMENTATION
We have segmented our market focus into the following categories:
. Top 35 Accounts
. Target Accounts
. Geographic Focus Accounts
Top 35 Accounts are a mix of our largest existing clients and our most strategic prospects. To facilitate proper account management, each top 35 account has an Answerthink leadership team member assigned to perform the role of client executive, an associate from the sales, solution strategist or delivery organizations to perform the role of Account Manager, and an associate from the delivery organization to perform the role of delivery leader.
Target Accounts are comprised of prospects and clients who are geographically situated where a sales representative resides. Criteria for inclusion as a target account includes the size of the company, industry affiliation, propensity to buy external consulting services and contacts within the account. The sales representative is primarily responsible to identify business opportunities in the account, act as the single point of coordination for the client and perform the general duties of account manager.
Geographic Focus Accounts are accounts within a specified geography that fall neither within the top 35 or target account lists. These accounts can include large prospects, dormant clients, existing medium-sized clients and mid-tier market accounts. This account set is handled primarily on an opportunistic basis, except for active clients where delivery teams are constantly driving additional revenue.
COMPETITION
The market for our services is highly competitive. Although the pressures to provide more services, complete projects more quickly and help clients reduce costs will only increase, we believe our competitive position has never been stronger. Our competitors include international accounting firms, international, national and regional systems consulting and implementation firms, the IT services divisions of application software firms, and marketing and communications firms.
The most significant competitive factors we face are perceived value, price and breadth of services offered. We believe that our multidisciplinary, knowledge-based approach, broad and expanding framework of services, and distinctive corporate culture allow us to compete favorably. The collaborative, communicative way we deliver strategic solutions that meet our clients' needs is also a key point of differentiation for us. By defining our brand around intellectual capital, technical expertise, industry knowledge and experience, quality of service and responsiveness to client needs, and speed in delivering our solution offerings, we will continue to strengthen our competitive position.
MANAGEMENT SYSTEMS
Our management control systems are comprised of various accounting, billing, financial reporting, human resources, marketing and resource allocations systems, many of which are integrated with our knowledge management system, Mind~Share. We continuously work to improve Mind~Share, as well as our infrastructure and management control systems, which represent a true competitive advantage for us. We believe that Mind~Share significantly enhances our ability to serve our clients efficiently by allowing our knowledge base to be shared by all of our consultants worldwide on a real-time basis. We also believe that our well-developed, flexible, scalable infrastructure has allowed us to quickly integrate new employees and systems of businesses we have acquired.
HUMAN RESOURCES
Our culture fosters intellectual rigor and creativity, collaboration and innovation. We believe in building relationships with our clients. We believe the best solutions come from teams of diverse individuals addressing problems collectively and from multiple dimensions, including the business, technological and human dimensions. We maintain that the most effective working environment is one where everyone is encouraged to contribute.
We believe that Answerthink's central values are the strongest expression
of our working style. They represent the behavior we want to encourage and the
people we want to develop. They are what, at our core, we really stand for.
These central values are:
. Diversity: of backgrounds, skills and experiences
. Knowledge: as individuals and a system of individuals
. Collaboration: with one another, with our partners and with our clients
Our working style is how those values get translated in daily life, how
clients experience working with us and how we deliver on our promises. Our work
style is:
. Insightful: the problems our clients face are complex; therefore we
have to be imaginative and innovative
. Thorough: we deliver rigorous, thorough solutions because that is what
our clients expect
. Committed: we are absolutely committed to delivering the right
solutions and avoiding the tempting compromises sometimes
offered by deadlines, budgets or politics
. Passionate: passion drives business success, our clients' success and,
therefore, ours
Our human resources staff includes dedicated resources to recruit consultants with both business and technology expertise. We have built a recruiting team that drives our hiring process by focusing on the highest demand solution areas of our business to ensure an adequate pipeline of resources. We also have an employee referral program which rewards existing employees who source new hires.
Training and development are keys to our success -- and therefore, our clients' successes. That is why we provide a thorough orientation and training curriculum for employees at every level. New hires complete "Onboarding" training to gain a complete picture of Answerthink, our mission, core objectives and values, as well as our organization, clients and structure. Key executives regularly attend these sessions. In addition, we train our consultants via Answerthink University in specific skill sets, such as business strategy, technology and project management, that best complement our multidisciplinary teams. To fully leverage our "front-line" experiences and support our culture, we often use our own people as trainers. Many of our practices maintain technology and development labs, so our implementation specialists can stay current on the latest software releases from leading vendors. Much of the ongoing development of our consultants comes from their work on client engagements involving new business models and technology, which is then captured in Mind~Share and made available for training other consultants.
The benefits package that we provide includes comprehensive health and welfare insurance, work/life balance programs, a 401(k) program including a company match, stock options and a stock purchase program. Our associates are paid competitive salaries and cash bonuses based upon market conditions and our performance. All billable employees are eligible to earn project bonuses based on project profitability and client satisfaction.
As of December 28, 2001, we had approximately 1,100 associates, approximately 82% of whom were billable professionals. None of our associates are subject to collective bargaining arrangements. We have entered into nondisclosure
and non-solicitation agreements with virtually all of our personnel. We engage consultants as independent contractors from time to time.
COMMUNITY INVOLVEMENT
One important way we put our values into action is through our commitment to the communities where we work. The mission of Answerthink's Community Council, which operates in each of the cities where we have offices, is to leave the markets, communities and clients we serve better than we found them. We do it by building a strong sense of community, collaboration and personal interaction among all of our associates, through both volunteer and service programs and social gatherings. Not only do the Community Council's efforts make our towns and cities better places to live and do business, but they also make Answerthink a better place to work. Answerthink's associates are actively involved in many valuable and high-impact community programs, including United Way, Ronald McDonald House, Big Brothers & Sisters, Race for the Cure, Make-A-Wish Foundation, Habitat for Humanity, the National Adoption Center and the National Heart Association.
RISK FACTORS
The following important factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K or printed elsewhere by management from time to time.
Our quarterly operating results may vary.
Our financial results may fluctuate from quarter to quarter. In future quarters, our operating results may not meet public market analysts' and investors' expectations. If that happens, the price of our common stock may fall. Many factors can cause these fluctuations, including:
. the number, size, timing and scope of client engagements;
. customer concentration;
. long and unpredictable sales cycles;
. contract terms of client engagements;
. degrees of completion of client engagements;
. client engagement delays or cancellations;
. competition for and utilization of employees;
. how well we estimate the resources we need to complete client engagements;
. the integration of acquired businesses;
. pricing changes in the industry;
. economic conditions specific to the Internet and information technology consulting; and
. general economic conditions.
A high percentage of our operating expenses, particularly personnel and rent, are fixed in advance of any particular quarter. As a result, if we experience unanticipated changes in client engagements or in employee utilization rates, we could experience large variations in quarterly operating results and losses in any particular quarter. Due to these factors, we believe you should not compare our quarter-to-quarter operating results to predict future performance.
If we are unable to maintain our reputation and expand our name recognition, we may have difficulty attracting new business and retaining current clients and employees.
We believe that establishing and maintaining a good reputation and name recognition are critical for attracting and retaining clients and employees. We also believe that the importance of reputation and name recognition is increasing and will continue to increase due to the number of providers of IT services. If our reputation is damaged or if potential clients are not familiar with us or with the solutions we provide, we may be unable to attract new, or retain existing, clients and employees. Promotion and enhancement of our name will depend largely on our success in continuing to provide effective solutions. If clients do not perceive our solutions to be effective or of high quality, our brand name and reputation will suffer. In addition, if solutions we provide have defects, critical business functions of our clients may fail, and we could suffer adverse publicity as well as economic liability.
We depend heavily on a limited number of clients.
We have derived, and believe that we will continue to derive, a significant portion of our revenues from a limited number of clients for which we perform large projects. In 2001, our five largest clients accounted for approximately 41% of our revenues in the aggregate, with two clients each accounting for more than 5% of revenues. In addition, revenues from a large client may constitute a significant portion of our total revenues in a particular quarter. The loss of any principal client for any reason, including as a result of the acquisition of that client by another entity, our failure to meet that client's expectations, or
that client's decision to reduce spending on technology-related projects, could have a material adverse effect on our business, financial condition and results of operations.
We have risks associated with potential acquisitions or investments.
Since we were founded, we have significantly expanded through acquisitions. In the future, we plan to pursue additional acquisitions. We will do this to:
. recruit well-trained, high-quality professionals;
. expand our service offerings;
. gain additional industry expertise;
. broaden our client base; and
. expand our geographic presence.
We may not be able to integrate successfully businesses which we may acquire in the future without substantial expense, delays or other operational or financial problems. We may not be able to identify, acquire or profitably manage additional businesses. Also, acquisitions may involve a number of risks, including:
. diversion of management's attention;
. failure to retain key personnel;
. failure to retain existing clients;
. unanticipated events or circumstances;
. legal liabilities; and
. amortization of acquired intangible assets.
We cannot assure you that client satisfaction or performance problems at a single acquired firm will not have a material adverse impact on our reputation as a whole. Further, we cannot assure you that our recent or future acquired businesses will generate anticipated revenues or earnings.
We may be unable to achieve anticipated benefits from acquisitions and joint ventures.
During last year, we completed one acquisition in the form of an asset purchase. The anticipated benefits from this and future acquisitions may not be achieved. For example, when we acquire a company or certain assets of a company, we cannot be certain that customers acquired in the transaction will continue to do business with us or that employees of the acquired operations will continue their employment or become well integrated into our operations. The identification, consummation and integration of acquisitions and joint ventures require substantial attention from management. The diversion of this attention from management, as well as any difficulties encountered in the integration process, could have an adverse impact on our business, financial condition and results of operations.
We may be subject to claims for past acts of the companies that we acquire, which may subject us to increased expenses.
We could experience financial or other setbacks if any of the businesses that we acquire had problems in the past of which we are not aware. To the extent any client or other third party asserts any legal claim against any of the companies we have acquired, our business, results of operations and financial condition could be materially and adversely affected.
We may not be able to hire, train, motivate, retain and manage professional staff.
To succeed, we must hire, train, motivate, retain and manage highly skilled employees. Competition for skilled employees who can perform the services we offer is intense. We might not be able to hire enough of them or to train, motivate, retain and manage the employees we hire. This could hinder our ability to complete existing client engagements and bid for new client engagements. Hiring, training, motivating, retaining and managing employees with the skills we need is time-consuming and expensive.
We could lose money on our contracts.
As part of our strategy, we enter into capped or fixed-price contracts, in addition to contracts based on payment for time and materials. Because of the complexity of many of our client engagements, accurately estimating the cost, scope and duration of a particular engagement can be a difficult task. If we fail to make these estimates accurately, we could be forced to devote additional resources to these engagements for which we will not receive additional compensation. To the extent that an expenditure of additional resources is required on an engagement, this could reduce the profitability of, or result in a loss on, the engagement. In the past, we have, on occasion, engaged in negotiations with clients regarding changes to the cost, scope or duration of specific engagements. To the extent we do not sufficiently communicate to our clients, or our clients fail to adequately appreciate, the nature and extent of any of these types of changes to an engagement, our reputation may be harmed and we may suffer losses on an engagement.
Lack of detailed written contracts could impair our ability to collect fees, protect our intellectual property and protect ourselves from liability to others.
We try to protect ourselves by entering into detailed written contracts with our clients covering the terms and contingencies of the client engagement. In some cases, however, consistent with what we believe to be industry practice, work is performed for clients on the basis of a limited statement of work or verbal agreements before a detailed written contract can be finalized. To the extent that we fail to have detailed written contracts in place, our ability to collect fees, protect our intellectual property and protect ourselves from liability to others may be impaired.
Our corporate governance provisions may deter a financially attractive takeover attempt.
Provisions of our charter and by-laws may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which stockholders would receive a premium for their shares. These provisions include the following:
. stockholders must comply with advance notice requirements before raising a matter at a meeting of stockholders or nominating a director for election;
. our board of directors is staggered into three classes and the members may be removed only for cause upon the affirmative vote of holders of at least two-thirds of the shares entitled to vote;
. we would not be required to hold a special meeting to consider a takeover proposal unless holders of more than a majority of the shares entitled to vote on the matter were to submit a written demand or demands for us to do so; and
. our board of directors may, without obtaining stockholder approval, classify and issue up to 1,250,000 shares of preferred stock with powers, preferences, designations and rights that may make it more difficult for a third party to acquire us.
Our markets are highly competitive.
We may not be able to compete effectively with current or future competitors. The IT services market is highly competitive. We expect competition to further intensify as this market continues to evolve. Some of our competitors have longer operating histories, larger client bases, longer relationships with their clients, greater brand or name recognition and significantly greater financial, technical and marketing resources than we do. As a result, our competitors may be in a stronger position to respond more quickly to new or emerging technologies and changes in client requirements and to devote
greater resources than we can to the development, promotion and sale of their services. Competitors could lower their prices, potentially forcing us to lower our prices and suffer reduced operating margins. We face competition from international accounting firms; international, national and regional systems consulting and implementation firms; the IT services divisions of application software firms; and marketing and communication firms.
In addition, there are relatively low barriers to entry into the IT services market. We do not own any patented technology that would stop competitors from entering this market and providing services similar to ours. As a result, the emergence of new competitors may pose a threat to our business. Existing or future competitors may develop and offer services that are superior to, or have greater market acceptance, than ours, which could significantly decrease our revenues and the value of your investment.
We may lose large clients or significant client engagements.
Our client engagements are generally short-term arrangements, and most clients can reduce or cancel their contracts for our services without penalty. As a result, if we lose a major client or large client engagement, our revenues will be adversely affected. We perform varying amounts of work for specific clients from year to year. A major client in one year may not use our services in another year. In addition, we may derive revenue from a major client that constitutes a large portion of total revenue for particular quarters. If we lose any major clients or any of our clients cancel or significantly reduce the scope of a large client engagement, our business, financial condition and results of operations could be materially and adversely affected. Also, if we fail to collect a large account receivable, we could be subjected to significant financial exposure. Consequently, you should not predict or anticipate our future revenue based upon the number of clients we currently have or the number and size of our existing client engagements.
We rely on our intellectual property rights.
We rely upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect our proprietary rights and the proprietary rights of third parties from whom we license intellectual property. Although we enter into confidentiality agreements with our employees and limit distribution of proprietary information, there can be no assurance that the steps we have taken in this regard will be adequate to deter misappropriation of proprietary information or that we will be able to detect unauthorized use and take appropriate steps to enforce our intellectual property rights.
Although we believe that our services do not infringe on the intellectual property rights of others and that we have all rights necessary to utilize the intellectual property employed in our business, we are subject to the risk of claims alleging infringement of third-party intellectual property rights. Any claims could require us to spend significant sums in litigation,
pay damages, develop non-infringing intellectual property or acquire licenses to the intellectual property that is the subject of asserted infringement.
The market price of our common stock may fluctuate widely.
The market price of our common stock could fluctuate substantially due to:
. future announcements concerning us or our competitors;
. quarterly fluctuations in operating results;
. announcements of acquisitions or technological innovations; or
. changes in earnings estimates or recommendations by analysts.
In addition, the stock prices of many technology companies fluctuate widely for reasons which may be unrelated to operating results. Fluctuations in our common stock's market price may impact our ability to finance our operations and retain personnel.
ITEM 2. PROPERTIES
Our principal executive offices currently are located at 1001 Brickell Bay Drive, Suite 3000, Miami, Florida 33131. The lease on these premises covers 16,036 square feet and expires June 30, 2003. We also have offices in Atlanta, Boston, Chicago, Cleveland, Dallas, Frankfurt, London, Los Angeles, New York, Philadelphia, Sarasota (FL), Seattle and Washington, D.C. We believe that we will be able to obtain suitable space as needed. We own no real estate and do not intend to invest in real estate or real estate-related assets.
ITEM 3. LEGAL PROCEEDINGS
On September 25, 1998, Michael R. Farrell, a shareholder of THINK New Ideas, filed a class action suit, Farrell v. THINK New Ideas, Inc., Scott Mednick, Melvin Epstein and Ronald Bloom, No. 98 Civ. 6809, against THINK New Ideas, Ronald Bloom, a former officer of THINK New Ideas and a former member of the Company's Board of Directors, Melvin Epstein and Scott Mednick, both former officers of THINK New Ideas. The suit was filed in the United States District Court for the Southern District of New York on behalf of all persons who purchased or otherwise acquired shares of THINK New Ideas' common stock in the class period from November 14, 1997, through September 21, 1998.
On various dates in October 1998, six additional class action suits were filed in the same court against the same parties by six different individuals, each representing a class of purchasers of THINK New Ideas' common stock. All seven of these lawsuits were consolidated by order of the court dated December 15, 1998 into one action titled In Re: THINK New Ideas, Inc., Consolidated Securities Litigation, No. 98 Civ. 6809 (SHS).
Pursuant to an order of the court, the plaintiffs filed a Consolidated and Amended Class Action Complaint on February 10, 1999 (the "Consolidated Complaint"). The Consolidated Complaint superceded all prior complaints in all of the cases and served as the operative complaint in the consolidated class action. The Consolidated Complaint was filed on behalf of all individuals who purchased THINK New Ideas' common stock from November 5, 1997 through September 21, 1998. The Consolidated Complaint contained substantially similar allegations as the complaint filed by Farrell, including that THINK New Ideas and certain of its current and former officers and directors disseminated materially false and misleading information about THINK New Ideas' financial position and results of operations through certain public statements and in certain documents filed by THINK New Ideas with the Securities and Exchange Commission; that these statements and documents caused the market price of THINK New Ideas' common stock to be artificially inflated; that the plaintiffs purchased shares of common stock at such artificially inflated prices and, as a consequence of such purchases, suffered damages. The relief sought in the Consolidated Complaint was unspecified, but included a plea for compensatory damages and interest, punitive damages, reasonable costs and expenses, including attorneys' fees and expert fees and such other relief as the court deemed just and proper.
This lawsuit became our responsibility upon the merger of Answerthink and THINK New Ideas. Prior to the merger, THINK New Ideas filed a motion to dismiss the Consolidated Complaint on a number of grounds. The plaintiffs filed a motion in opposition. On March 15, 2000, the court granted the defendant's motion to dismiss the Consolidated Complaint. The plaintiffs filed a Second Consolidated and Amended Class Action Complaint (the "Second Amended Complaint") on April 14, 2000. The defendants filed a motion to dismiss the Second Amended Complaint on May 1, 2000. On September 14, 2000, the court denied the motion. The defendants filed an answer to the Second Amended Complaint on November 10, 2000. The deadline for fact discovery was February 22, 2002. The plaintiffs' motion for class certification is pending before the court. The defendants have until April 5, 2002 to file an opposition to that motion. We believe there are meritorious defenses to the claims made in the Second Amended Complaint and we intend to contest those claims vigorously. Although there can be no assurance as to the outcome of these matters, an unfavorable resolution could have a material adverse effect on the results of our operations and/or financial condition in the future.
In June 2000, pursuant to a confidential settlement agreement, the Company settled litigation in which it was the plaintiff. We recorded a gain of $1.85 million as a result of this settlement.
We are involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such other matters will not have a material adverse effect on our financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 2001.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock has been traded on the Nasdaq National Market since our initial public offering on May 28, 1998 under the Nasdaq symbol "ANSR". The following table sets forth for the fiscal periods indicated the high and low sales prices of the common stock, as reported on the Nasdaq National Market.
High Low
------------ ------------
2001
Fourth Quarter $ 6.80 $ 3.15
Third Quarter $ 9.81 $ 3.50
Second Quarter $ 9.99 $ 3.50
First Quarter $ 9.06 $ 3.25
2000
Fourth Quarter $18.75 $ 2.53
Third Quarter $19.94 $ 13.44
Second Quarter $28.50 $ 14.00
First Quarter $40.38 $ 20.13
|
The closing sale price for the common stock on March 15, 2002 was $6.90.
As of March 15, 2002, there were approximately 386 holders of record of our common stock and 46,839,761 shares of common stock outstanding.
COMPANY DIVIDEND POLICY
We do not expect to pay any cash dividends on our common stock in the foreseeable future. Our present policy is to retain earnings, if any, for use in the operation of our business. In addition, under the terms of our revolving credit facility, we cannot pay dividends to our shareholders.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data sets forth selected financial information for Answerthink as of and for each of the years in the five-year period ended December 28, 2001, and has been derived from our audited financial statements. The selected consolidated financial data should be read together with our consolidated financial statements and related notes thereto and with "Management's Discussion and Analysis of Financial Condition and Results of Operations."
We merged with triSpan, Inc. ("triSpan") in February 1999 and THINK New Ideas in November 1999 in transactions that were accounted for using the pooling-of-interests method of accounting. All historical financial information included in the selected consolidated financial data has been restated to include the financial position and results of operations of triSpan and THINK New Ideas. Accordingly, financial information presented herein prior to Answerthink's date of incorporation of April 23, 1997 is solely that of triSpan and THINK New Ideas. Prior to the merger with THINK New Ideas, THINK New Ideas used a fiscal year ending June 30. The 1999 and 1998 consolidated financial statements combine the Company's and THINK New Ideas' financial statements for the years ended December 31, 1999 and January 1, 1999. The restated consolidated financial statements as of and for the year ended January 2, 1998 include the operating results of Answerthink as of and for the year ended January 2, 1998 and the operating results of THINK New Ideas as of and for the year ended June 30, 1998.
Year Ended
-------------------------------------------------------------------
December 28, December 29, December 31, January 1, January 2,
2001 2000 1999 1999 1998
------------ ------------ ------------ ------------ -----------
(in thousands, except per share data)
Consolidated Statement of Operations Data:
Net revenues............................................ $ 247,461 $ 311,136 $ 260,460 $ 167,517 $ 77,144
Costs and expenses:
Project personnel and expenses........................ 155,150 181,338 153,571 98,314 45,975
Selling, general and administrative expenses.......... 88,704 111,033 83,661 63,530 37,147
Restructuring costs................................... 8,489 3,700 -- -- --
Stock compensation expense............................ 4,855 853 960 64,626 23,043
Merger related expenses............................... -- -- 11,700 -- --
Purchased research and development expense............ -- -- -- 5,200 9,200
Settlement costs...................................... -- -- -- -- 1,903
------------ ------------ ------------ ------------ -----------
Total costs and operating expenses.................. 257,198 296,924 249,892 231,670 117,268
------------ ------------ ------------ ------------ -----------
Income (loss) from operations........................... (9,737) 14,212 10,568 (64,153) (40,124)
Other income (expense):
Litigation settlement................................. -- 1,850 -- 2,500 --
Non-cash investment losses............................ -- (2,350) -- -- --
Interest income (expense), net........................ 1,057 1,128 281 (631) 556
------------ ------------ ------------ ------------ -----------
Income (loss) before income taxes and extraordinary loss (8,680) 14,840 10,849 (62,284) (39,568)
Income tax expense (benefit)............................ (161) 6,939 7,602 (870) 340
------------ ------------ ------------ ------------ -----------
Income (loss) before extraordinary loss (8,519) 7,901 3,247 (61,414) (39,908)
Extraordinary loss on early extinguishment of debt (net
of taxes)............................................. -- -- 2,113 -- --
------------ ------------ ------------ ------------ -----------
Net income (loss)....................................... $ (8,519) $ 7,901 $ 1,134 $ (61,414) $ (39,908)
============ ============ ============ ============ ===========
Basic net income (loss) per common share .............. $ (0.19) $ 0.20 $ 0.03 $ (2.47) $ (3.46)
Weighted average common shares outstanding.............. 43,999 40,262 34,953 24,844 11,521
Diluted net income (loss) per common share ............ $ (0.19) $ 0.18 $ 0.03 $ (2.47) $ (3.46)
Weighted average common shares and common share
equivalents........................................... 43,999 45,137 43,098 24,844 11,521
|
December 28, December 29, December 31, January 1, January 2,
2001 2000 1999 1999 1998
------------ ------------ ------------ ------------ -----------
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents .............................. $ 59,888 $ 51,662 $ 27,124 $ 36,931 $ 10,781
Working capital ........................................ $ 81,313 $ 74,787 $ 55,166 $ 49,711 $ 15,349
Total assets ........................................... $ 211,919 $ 228,676 $ 200,713 $ 153,394 $ 86,686
Shareholders' equity.................................... $ 177,701 $ 172,054 $ 140,270 $ 100,789 $ 35,351
|
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Answerthink is a leading provider of technology-enabled business transformation solutions. The Company brings together multi-disciplinary expertise in benchmarking, business transformation, interactive direct marketing, business applications and technology integration to serve the needs of Global 2000 clients. Answerthink's solutions span all functional areas of a company including finance, human resources, information technology, sales, marketing, customer service, and supply chain, as well as across a variety of industry sectors.
Answerthink was formed on April 23, 1997. Since our formation, we have grown through internal expansion as well as through mergers and acquisitions. In February 1999, we merged with triSpan, a provider of Internet consulting, Web application development and integration services. In November 1999, we merged with THINK New Ideas, a provider of interactive marketing, branding and creative Web site development services. The mergers with triSpan and THINK New Ideas were accounted for using the pooling-of-interests method of accounting. Our historical consolidated financial statements were restated to include the financial position, results of operations and cash flows of triSpan and THINK New Ideas. Financial information prior to Answerthink's date of incorporation of April 23, 1997 represents only the combined results of triSpan and THINK New Ideas. Our acquisitions (with the exception of the mergers with triSpan and THINK New Ideas) were accounted for using the purchase method of accounting and our historical Consolidated Financial Statements include the operating results of the companies we acquired from the date of each respective acquisition. Our consolidated financial statements may lack comparability from period to period because of acquisitions we made for which we used the purchase method of accounting.
CRITICAL ACCOUNTING POLICIES
Revenue Recognition
Our revenues are derived from fees for services generated on a project-by-project basis. Revenues for services rendered are recognized on a time and materials basis based on the number of hours worked by our consultants at an agreed upon rate per hour or on a fixed-fee or capped-fee basis. Revenues related to time and material contracts are recognized in the period in which services are performed. Revenues related to fixed-fee or capped-fee contracts are recognized based on our evaluation of actual costs incurred to date compared to total estimated costs using the percentage of completion method of accounting. The cumulative impact of any revisions in estimated total revenues and direct contract costs are recognized in the period in which they become known. Unbilled revenues represent revenues for services performed that have not been billed. If we do not accurately estimate the resources required or the scope of the work to be performed, or we do not manage our projects properly within the planned periods of time or we do not meet our clients' expectations under the contracts, then future consulting margins may be significantly and negatively affected or losses on existing contracts may need to be recognized. Any such resulting reductions in margins or contract losses could be material to our results of operations. Net revenues exclude reimbursable expenses charged to clients.
The agreements entered into in connection with a project, whether time and materials based or fixed-fee or capped-fee based, are typically terminable by the client upon 30 days' notice. Upon early termination of an engagement, the client is required to pay for all time, materials and expenses incurred by us through the effective date of the termination. In addition, provisions in some of the agreements we have with our clients limit our right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit us from performing a defined range of our services that we might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.
Accounts Receivable and Allowances for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our clients to make required payments. Our management makes estimates of the uncollectibility of our accounts receivables. Management critically reviews accounts receivable and analyzes historical bad debts, past-due accounts, client credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. If the financial condition of our clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Goodwill and Other Intangible Assets
Goodwill represents the cost of acquired companies in excess of the fair-value of the net assets acquired. Goodwill is amortized over 15 years on a straight-line basis. Other intangible assets include the portion of the cost of acquired companies assigned to other intangible assets and are amortized over the period of expected discounted cash flows. We assess the impairment of goodwill and other intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If we determine that the carrying value of goodwill and other intangible assets may not be recoverable, we measure any impairment based on a projected undiscounted cash flow method.
Under Statement of Financial Accounting Standards No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their estimated useful lives. Under the provisions of SFAS 142, goodwill and indefinite lived intangible assets arising from a business combination completed after June 30, 2001 will not be amortized even though a company has not otherwise adopted SFAS 142. Accordingly, we adopted the provisions of SFAS 142 in accounting for our acquisition completed on August 26, 2001 and therefore, the goodwill resulting from this acquisition is not being amortized. We will apply the provisions of SFAS 142 to our remaining goodwill and intangible assets beginning in the first quarter of 2002. Application of the non-amortization provisions of SFAS 142 is expected to result in an increase in net income of $6.0 million per year. During 2002, we will perform the first of the required tests of goodwill and indefinite lived intangible assets as of December 29, 2001. We have not yet determined what the effect of these tests will be on our earnings and financial position.
Litigation and Contingencies
Litigation and contingencies are reflected in our consolidated financial statements based on management's assessment, along with legal counsel, of the expected outcome from such litigation. If the final outcome of such litigation and contingencies differs adversely from that currently expected, it would result in a charge to earnings when determined.
RESULTS OF OPERATIONS
Our fiscal year ends on the Friday closest to December 31. Our fiscal year generally consists of a 52-week period. Fiscal years 2001, 2000 and 1999 ended on December 28, 2001, December 29, 2000 and December 31, 1999, respectively. References to a year included in this section refer to a fiscal year rather than a calendar year.
The following table sets forth, for the periods indicated, our results of operations and the percentage relationship to net revenues of such results:
Year Ended
----------------------------------------------------------------
December 28, 2001 December 29, 2000 December 31, 1999
--------------------- ------------------- -------------------
(in thousands, except percentage data)
Net revenues $ 247,461 100.0% $ 311,136 100.0% $ 260,460 100.0%
Costs and expenses:
Project personnel and expenses 155,150 62.7% 181,338 58.3% 153,571 58.9%
Selling, general and administrative expenses 88,704 35.8% 111,033 35.7% 83,661 32.1%
Restructuring costs 8,489 3.4% 3,700 1.2% -- --
Stock compensation expense 4,855 2.0% 853 0.2% 960 0.4%
Merger related expenses -- -- -- -- 11,700 4.5%
---------- -------- ---------- -------- ---------- --------
Total costs and operating expenses 257,198 103.9% 296,924 95.4% 249,892 95.9%
---------- -------- ---------- -------- ---------- --------
Income (loss) from operations (9,737) (3.9%) 14,212 4.6% 10,568 4.1%
Other income (expense):
Litigation settlement -- -- 1,850 0.6% -- --
Non-cash investment losses -- -- (2,350) (0.8%) -- --
Interest income (expense), net 1,057 0.4% 1,128 0.3% 281 0.1%
---------- --------- ---------- -------- ---------- --------
Income (loss) before income taxes and
extraordinary loss (8,680) (3.5%) 14,840 4.7% 10,849 4.2%
Income tax expense (benefit) (161) (0.1%) 6,939 2.2% 7,602 2.9%
---------- --------- ---------- -------- ---------- --------
Income (loss) before extraordinary loss (8,519) (3.4%) 7,901 2.5% 3,247 1.3%
Extraordinary loss on early extinguishment
of debt (net of taxes) -- -- -- -- 2,113 0.8%
---------- --------- ---------- -------- ---------- --------
Net income (loss) $ (8,519) (3.4%) $ 7,901 2.5% $ 1,134 0.5%
---------- --------- ---------- -------- ---------- --------
|
COMPARISON OF 2001 TO 2000
Overview. We reported a net loss of $8.5 million in 2001 compared to net income of $7.9 million in 2000. Our $8.5 million net loss during 2001 included non-recurring items of $8.5 million related to restructuring costs associated with personnel and facilities reductions and $4.9 million of non-cash compensation expense. The compensation expense was primarily related to the granting of "in-the-money" stock options to participants in our Employee Stock Purchase Plan in lieu of the Employee Stock Purchase Plan shares that could not be issued because the plan was oversubscribed for the purchase periods ending December 31, 2000 and June 30, 2001. In 2000, we incurred non-recurring items of $10.5 million related to reserves for dotcom related receivables, $3.7 million of restructuring costs associated with personnel and facilities reductions, $2.4 million for non-cash investment losses and $1.85 million of income from a litigation settlement. Our loss in 2001 was attributable to the non-recurring items mentioned above as well as the decrease in revenues resulting from a decline in information technology spending by our customers and potential customers in reaction to the overall slowdown in the economy during 2001.
Net Revenues. Net revenues decreased 20.5% to $247.5 million in 2001 from $311.1 million in 2000. The decrease in net revenues was primarily attributable to a decrease in the number of customers and the average size of our projects resulting from reduced demand for information technology services. In 2001, two customers each had revenues greater than 5% of total net revenues. In the aggregate, these two customers accounted for approximately 30% of total net revenues. In 2000, one customer accounted for approximately 11% of net revenues.
Project Personnel and Expenses. Project personnel costs and expenses consist primarily of salaries, benefits and bonuses for consultants. Project personnel costs and expenses decreased 14.4% to $155.2 million in 2001 from $181.3 million in 2000. The decrease in project personnel and expenses was the result of a decrease in the number of consultants, partially offset by an increase in average salaries. Consultant headcount was 1,011 as of December 28, 2001 compared to 1,376 as of December 29, 2000. Project personnel and expenses as a percentage of net revenues increased to 62.7% in 2001 from 58.3% in 2000. This increase in project personnel costs and expenses as a percentage of net revenues was due to lower consultant utilization, partially offset by higher billing rates.
Selling, General and Administrative. Selling, general and administrative expenses decreased 20.1% to $88.7 million in 2001 from $111.0 million in 2000. The decrease in selling, general and administrative expenses was primarily a result of a decrease in bad debt expense, lower salary and benefit expenses associated with a decrease in functional support associates, lower recruiting and training costs resulting from a decrease in the number of consultants and reduced marketing costs. Sales and functional support headcount was 168 as of December 28, 2001 compared to 270 as of December 29, 2000. Selling, general and administrative expenses as a percentage of net revenues were comparable between 2001 and 2000 at 35.8% and 35.7%, respectively.
Restructuring Costs. Restructuring costs were $8.5 million and $3.7 million in 2001 and 2000, respectively. In 2001, costs consisted of $4.3 million for reduction in consultants and functional support personnel and $4.2 million for closure and consolidation of facilities and related exit costs. The 2000 costs related to the reduction in consultants and functional support personnel and closure and consolidation of facilities and related exit costs. These actions were taken as a result of the continued decline in demand for technology services in the latter portion of 2000 and throughout 2001. We took steps to reduce our costs to better align our overall cost structure and organization with anticipated demand for our services. The 2001 restructuring plan involved the involuntary termination of approximately 260 employees. Approximately 200 employees were terminated by December 28, 2001. Accrued restructuring related expenses were $5.7 million as of December 28, 2001, of which $4.5 million related to closure and consolidation of facilities and related exit costs and $1.2 million related to reduction in personnel.
Stock Compensation Expense. Stock compensation expense in 2001 primarily related to the granting of stock options to participants in our Employee Stock Purchase Pan. These stock options were granted in lieu of the Employee Stock Purchase Plan shares that could not be issued because the plan was oversubscribed for the purchase periods ending on December 31, 2000 and June 30, 2001. We recorded a non-cash compensation charge of $4.2 million in 2001 for the difference between the fair market value of the stock on the option grant date and the exercise price.
Litigation Settlement. In June 2000, pursuant to a confidential settlement agreement, we settled litigation in which we were the plaintiff. We recorded a gain of $1.85 million as a result of this settlement.
Non-Cash Investment Losses. In the fourth quarter of 2000, we recorded non-cash investment losses of $2.4 million related to the full impairment of all of our dotcom related investments.
Income Taxes. We recorded an income tax benefit of $161,000 in 2001, which represented 1.85% of our 2001 pre-tax loss. In 2000, we recorded income tax expense of $6.9 million, which represented 46.8% of our 2000 pre-tax income. The lower effective tax rate for 2001 was primarily due to the impact of permanent differences, primarily goodwill amortization, on a relatively small pretax loss.
COMPARISON OF 2000 TO 1999
Overview. In 2000, we reported net income of $7.9 million compared to net income of $1.1 million in 1999. Our $7.9 million net income during 2000 included non-recurring items of $10.5 million related to reserves for dotcom related receivables, $3.7 million of restructuring costs associated with personnel and facilities reductions, $2.4 million for non-cash investment losses and $1.85 million of income from a litigation settlement. In 1999, we incurred non-recurring charges consisting primarily of $11.7 million for our mergers with triSpan and THINK New Ideas and a $2.1 million extraordinary loss on the early extinguishment of debt that was assumed in connection with our merger with triSpan.
Net Revenues. Net revenues increased 19.5% to $311.1 million in 2000 from $260.5 million in 1999. The increase in revenues resulted primarily from increases in the average size of our engagements both for new clients and follow-up work with existing clients as well as higher billing rates. In 2000, one customer accounted for approximately 11% of net revenues. No single customer accounted for more than 5% of net revenues in 1999.
Project Personnel and Expenses. Project personnel costs and expenses increased 18.1% to $181.3 million in 2000 from $153.6 million in 1999. This increase was primarily due to an increase in the average number of consultants required to serve our clients during the year and an increase in average salaries. However, due to staff reductions in the fourth quarter of 2000, our year-end billable headcount remained relatively consistent at 1,376 at December 29, 2000 compared to 1,396 at December 31, 1999. Project personnel costs and expenses as a percentage of net revenues were 58.3% in 2000 compared to 58.9% during 1999. This decrease was primarily due to an increase in the average billing rate for consultants.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 32.7% to $111.0 million in 2000 from $83.7 million in 1999. The increase in selling, general and administrative expenses primarily related to a non-recurring charge of $10.5 million in the fourth quarter of 2000 related to reserves for dotcom related receivables, an increase in selling costs due to higher sales volume, increased marketing costs associated with our name change and branding campaign, increased technology costs and additional goodwill amortization expense associated with our acquired businesses. Selling, general and administrative expenses as a percentage of net revenues increased to 35.7% in 2000 from 32.1% during 1999. This increase was primarily attributable to the non-recurring charges recorded in the fourth quarter of 2000.
Merger Related Expenses. Merger related expenses were $11.7 million in 1999. These expenses related to our mergers with triSpan in February 1999 and THINK New Ideas in November 1999, which were accounted for as poolings-of-interests. The expenses included investment banking, legal and accounting fees as well as the costs of combining operations and eliminating duplicate facilities.
Income Taxes. We recorded income tax expense of $6.9 million, which represented 46.8% of our pre-tax income in 2000. In 1999, we recorded an income tax expense of $7.6 million, which represented 70.0% of our pre-tax income. The higher than expected tax rate in 1999 was primarily attributable to non-deductible merger related expenses and the establishment of a deferred tax liability for triSpan when it converted from an S corporation to a C corporation at the time of the merger.
Extraordinary Loss on Early Extinguishment of Debt. The extraordinary loss on early extinguishment of debt in 1999 was a result of the repayment of subordinated notes that were assumed in connection with the triSpan merger. These notes, which had a face amount of $8.0 million and a stated interest rate of 8%, were originally issued at a substantial discount. Immediately following the merger with triSpan, we repaid the notes in full, which resulted in an extraordinary loss of $2.1 million, net of a $1.4 million tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily with cash flow generated from operations and the proceeds from our initial public offering. On May 28, 1998, we completed our initial public offering of our common stock, which resulted in net proceeds of $38.5 million. We also have a revolving credit facility for $15.0 million. The credit facility includes, among other things, covenants relating to the maintenance of certain financial ratios. At December 28, 2001, we had no borrowings under this facility. Letters of credit of $2.7 million were outstanding under the agreement. At December 28, 2001, we had $59.9 million of cash and cash equivalents compared to $51.7 million at December 29, 2000.
Net cash provided by operating activities was $15.5 million for 2001 compared to $20.2 million provided by operating activities during 2000. During 2001, net cash provided by operating activities was primarily attributable to a $15.3 million decrease in accounts receivable and unbilled revenue and non-cash expenses of $22.5 million, partially offset by a $8.5 million net loss, a $6.3 million decrease in media payable, a $6.0 million decrease in accrued expenses and other liabilities and a $4.8 million decrease in accounts payable. Net cash provided by operating activities during 2000 related primarily to our net income of $7.9 million and non-cash expenses of $26.7 million, partially offset by a $9.7 million increase in prepaid expenses and other assets and a $9.2 million decrease in media payable. Media payables represent media placement costs owed to media providers on behalf of our customers. Amounts in media payables that have been billed to our customers are included in other receivables. The level of media payables and the related receivables will vary with the timing of our customers' media campaigns.
Net cash used in investing activities was $11.7 million for 2001 compared to $11.0 million used during 2000. The use of cash for investing activities in 2001 was attributable to $9.5 million of purchases of property and equipment and $2.1 million used in the acquisition of businesses. During 2000, the uses of cash for investing activities were $8.9 million of purchases of
property and equipment and $4.6 million of additional consideration for certain prior acquisitions, partially offset by net sales and redemptions of short-term investments of $2.4 million.
Net cash provided by financing activities was $4.4 million in 2001 compared to $15.4 million during 2000. The source of cash from financing activities during 2001 was $4.4 million of proceeds from the sale of common stock as a result of exercises of stock options as well as the sale of stock through our Employee Stock Purchase Plan. During 2000, the primary source of cash from financing activities was $17.2 million of proceeds from the sale of common stock as a result of exercises of stock options and warrants as well as the sale of stock through our Employee Stock Purchase Plan, partially offset by $1.8 million repayment of notes payable.
We currently believe that available funds and cash flows generated by operations, if any, will be sufficient to fund our working capital and capital expenditures requirements for at least the next twelve months. We may decide to raise additional funds in order to fund expansion, to develop new or enhanced products and services, to respond to competitive pressures or to acquire complementary businesses or technologies. We cannot assure you however, that additional financing will be available when needed or desired on terms favorable to us or at all.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations, effective for all business combinations completed after June 30, 2001, and No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. SFAS 141 eliminates the pooling-of-interest method for business combinations and requires the application of the purchase method. Under SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their estimated useful lives. Under the provisions of SFAS 142, goodwill and indefinite lived intangible assets arising from a business combination completed after June 30, 2001 will not be amortized even though a company has not otherwise adopted SFAS 142. Accordingly, we adopted the provisions of SFAS 142 in accounting for our acquisition completed on August 26, 2001 and therefore, the goodwill resulting from this acquisition is not being amortized. We will apply the provisions of SFAS 142 to our remaining goodwill and intangible assets beginning in the first quarter of 2002. Application of the non-amortization provisions of SFAS 142 is expected to result in an increase in net income of $6.0 million per year. During 2002, we will perform the first of the required annual impairment tests of goodwill and indefinite lived intangible assets as of December 29, 2001. We have not yet determined what the effect of these tests will be on our earnings and financial position.
In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), Accounting for the Impairment or Disposal of Long Lived Assets. SFAS 144 is effective for fiscal years beginning after December 15, 2001 and supersedes Statement of Financial Accounting Standards No. 121, while retaining many of the requirements of such statement. We are currently evaluating the effect that such adoption may have on our consolidated results of operations and financial position.
In November 2001, the Emerging Issues Task Force issued Topic No. D-103, Income Statement Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred, effective for fiscal years beginning after December 15, 2001. In accordance with Topic No. D-103, reimbursements received for out-of-pocket expenses incurred should be characterized as revenue in the statement of operations. We have historically accounted for reimbursements received for out-of-pocket expenses incurred as a reduction to project personnel and expenses in the statement of operations. We will adopt Topic No. D-103 in financial reporting periods beginning after December 28, 2001 and comparative financial statements for prior periods will be reclassified to comply with the guidance in Topic No. D-103. During the years ended December 28, 2001, December 29, 2000 and December 31, 1999, reimbursed out-of-pocket expenses totaled $31.8 million, $39.4 million and $29.3 million, respectively. Accordingly, if the provisions of Topic No. D-103 had been adopted during these years ended, revenues and project personnel and expenses would have been higher by the amounts noted. Our net income would not have changed but gross profit as a percentage of total revenues would have decreased.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not believe that there is any material market risk exposure with respect to derivative or other financial instruments, which would require disclosure under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANSWERTHINK, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants 26
Consolidated Balance Sheets as of December 28, 2001 and December 29, 2000 27
Consolidated Statements of Operations for the Years Ended December 28, 2001, December 29, 2000 and
December 31, 1999 28
Consolidated Statements of Shareholders' Equity for the Years Ended December 28, 2001, December 29, 2000
and December 31, 1999 29
Consolidated Statements of Cash Flows for the Years Ended December 28, 2001, December 29, 2000 and
December 31, 1999 30
Notes to Consolidated Financial Statements 31
Schedule II -- Valuation and Qualifying Accounts and Reserves 46
|
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Answerthink, Inc.
Miami, Florida
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Answerthink, Inc. and its subsidiaries (the "Company") at December 28, 2001 and December 29, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 28, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. The financial statements give retroactive effect to the mergers of triSpan, Inc. on February 26, 1999 and THINK New Ideas, Inc. on November 5, 1999 in transactions accounted for as pooling of interests, as described in Note 2 to the financial statements. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP Miami, Florida February 7, 2002 |
ANSWERTHINK, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 28, December 29,
2001 2000
----------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents $ 59,888 $ 51,662
Accounts receivable and unbilled revenue, net of allowance of $6,810
and $11,122 in 2001 and 2000, respectively 39,164 59,706
Other receivables 851 3,547
Prepaid expenses and other assets 15,628 16,494
----------------- ----------------
Total current assets 115,531 131,409
Property and equipment, net 18,468 14,655
Goodwill, net 77,920 82,612
----------------- ----------------
Total assets $ 211,919 $ 228,676
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,187 $ 10,006
Accrued expenses and other liabilities 27,992 39,270
Media payable 1,039 7,346
----------------- ----------------
Total current liabilities 34,218 56,622
----------------- ----------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par value, 1,250,000 shares authorized, none issued and
outstanding -- --
Common stock, $.001 par value, authorized 125,000,000 shares; issued and
outstanding: 45,880,118 shares at December 28, 2001; 44,234,837 shares at
December 29, 2000 46 44
Additional paid-in capital 257,115 243,299
Unearned compensation -- (348)
Accumulated deficit (79,460) (70,941)
----------------- -----------------
Total shareholders' equity 177,701 172,054
----------------- ----------------
Total liabilities and shareholders' equity $ 211,919 $ 228,676
================= ================
|
The accompanying notes are an integral part of the consolidated financial statements.
ANSWERTHINK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended
-----------------------------------------------------
December 28, December 29, December 31,
2001 2000 1999
----------------- ----------------- -----------------
Net revenues $ 247,461 $ 311,136 $ 260,460
Costs and expenses:
Project personnel and expenses 155,150 181,338 153,571
Selling, general and administrative expenses 88,704 111,033 83,661
Restructuring costs 8,489 3,700 --
Stock compensation expense 4,855 853 960
Merger related expenses -- -- 11,700
----------------- ----------------- -----------------
Total costs and operating expenses 257,198 296,924 249,892
----------------- ----------------- -----------------
Income (loss) from operations (9,737) 14,212 10,568
Other income (expense):
Litigation settlement -- 1,850 --
Non-cash investment losses -- (2,350) --
Interest income 1,222 1,383 926
Interest expense (165) (255) (645)
----------------- ----------------- -----------------
Income (loss) before income taxes and extraordinary loss (8,680) 14,840 10,849
Income tax expense (benefit) (161) 6,939 7,602
----------------- ----------------- -----------------
Income (loss) before extraordinary loss (8,519) 7,901 3,247
Extraordinary loss on early extinguishment of debt (net of
taxes of $1,408) -- -- 2,113
----------------- ----------------- -----------------
Net income (loss) $ (8,519) $ 7,901 $ 1,134
================= ================= =================
Basic net income (loss) per common share:
Income (loss) before extraordinary loss $ (0.19) $ 0.20 $ 0.09
Extraordinary loss on early extinguishment of debt $ -- $ -- $ (0.06)
Net income (loss) per common share $ (0.19) $ 0.20 $ 0.03
Weighted average common shares outstanding 43,999 40,262 34,953
Diluted net income (loss) per common share:
Income (loss) before extraordinary loss $ (0.19) $ 0.18 $ 0.08
Extraordinary loss on early extinguishment of debt $ -- $ -- $ (0.05)
Net income (loss) per common share $ (0.19) $ 0.18 $ 0.03
Weighted average common and common equivalent shares outstanding 43,999 45,137 43,098
|
The accompanying notes are an integral part of the consolidated financial statements.
ANSWERTHINK, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Common Stock Additional Total
--------------------- Paid-in Unearned Accumulated Shareholders'
Shares Amount Capital Compensation Deficit Equity
------------ -------- ------------- ------------ ----------- -------------
Balance at January 1, 1999 40,229 $ 40 $ 182,115 $ (1,390) $ (79,976) $ 100,789
Issuance of common stock 1,631 2 14,978 -- -- 14,980
Purchase and retirement of stock (350) -- (3) -- -- (3)
Issuance of common stock for business acquisitions 1,222 1 22,794 -- -- 22,795
Amortization of deferred compensation expense -- -- -- 575 -- 575
Net income -- -- -- -- 1,134 1,134
------------ -------- ------------- ------------ ----------- -------------
Balance at December 31, 1999 42,732 $ 43 $ 219,884 $ (815) $ (78,842) $ 140,270
Issuance of common stock 1,298 1 17,176 -- -- 17,177
Purchase and retirement of stock (172) -- (1,883) -- -- (1,883)
Issuance of common stock for business acquisitions 377 -- 8,122 -- -- 8,122
Amortization of deferred compensation expense -- -- -- 467 -- 467
Net income -- -- -- -- 7,901 7,901
----------- -------- ------------- ------------ ------------ ------------
Balance at December 29, 2000 44,235 $ 44 $ 243,299 $ (348) $ (70,941) $ 172,054
Issuance of common stock 890 1 4,366 -- -- 4,367
Issuance of stock options -- -- 4,218 -- -- 4,218
Issuance of common stock for business acquisitions 755 1 5,232 -- -- 5,233
Amortization of deferred compensation expense -- -- -- 348 -- 348
Net loss -- -- -- -- (8,519) (8,519)
------------ -------- ------------- ------------ ----------- -------------
Balance at December 28, 2001 45,880 $ 46 $ 257,115 $ -- $ (79,460) $ 177,701
============ ======== ============= ============ =========== =============
|
The accompanying notes are an integral part of the consolidated financial statements.
ANSWERTHINK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
-------------------------------------------
December 28, December 29, December 31,
2001 2000 1999
------------- ------------- ---------------
Cash flows from operating activities:
Net income (loss) $ (8,519) $ 7,901 $ 1,134
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Extraordinary loss on early exinguishment of debt -- -- 2,113
Depreciation and amortization 12,531 12,589 10,397
Non-cash compensation expense 4,855 853 960
Provision for doubtful accounts 5,279 12,982 1,357
Deferred income taxes (160) (175) (2,663)
Investment losses -- 2,350 --
Gain on litigation settlement -- (1,850) --
Impairment of capitalized software -- -- 989
Changes in assets and liabilities, net of effects from acquisitions:
Decrease (increase) in accounts receivable and unbilled revenue 15,263 1,716 (25,648)
Decrease in other receivables 2,696 1,793 5,426
Decrease (increase) in prepaid expenses and other assets 740 (9,689) (1,254)
Increase (decrease) in accounts payable (4,819) 1,024 (3,477)
Increase (decrease) in accrued expenses and other liabilities (6,044) (181) 13,571
Increase (decrease) in media payable (6,307) (9,154) 4,408
------------- ------------- -------------
Net cash provided by operating activities 15,515 20,159 7,313
Cash flows from investing activities:
Purchases of property and equipment (9,514) (8,920) (5,285)
Purchases of short-term investments -- (500) (2,432)
Redemption, sales and maturities of short-term investments -- 2,932 1,000
Cash used in acquisition of businesses, net of cash acquired (2,142) (4,560) (10,918)
------------- ------------- -------------
Net cash used in investing activities (11,656) (11,048) (17,635)
Cash flows from financing activities:
Proceeds from issuance of common stock 4,367 17,177 14,980
Purchase and retirement of common stock -- -- (3)
Proceeds from revolving credit facility -- -- 400
Repayment of revolving credit facility -- -- (2,177)
Repayment of notes payable -- (1,750) (4,685)
Repayment of redeemable subordinated notes -- -- (8,000)
------------- ------------- -------------
Net cash provided by financing activities 4,367 15,427 515
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 8,226 24,538 (9,807)
Cash and cash equivalents at beginning of year 51,662 27,124 36,931
------------- ------------- -------------
Cash and cash equivalents at end of year $ 59,888 $ 51,662 $ 27,124
============= ============= =============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 92 $ 100 $ 546
Cash paid for income taxes $ 1,524 $ 9,673 $ 8,268
|
The accompanying notes are an integral part of the consolidated financial statements.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Answerthink, Inc. (the "Company" or "Answerthink") is a leading provider of technology-enabled business transformation solutions. The Company brings together multi-disciplinary expertise in benchmarking, business transformation, interactive direct marketing, business applications and technology integration to serve the needs of Global 2000 clients. Answerthink's solutions span all functional areas of a company including finance, human resources, information technology, sales, marketing, customer service and supply-chain, as well as across a variety of industry sectors.
Principles of Consolidation
The consolidated financial statements include the accounts of Answerthink and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. In February 1999, Answerthink merged with triSpan, Inc. ("triSpan") and in November 1999, Answerthink merged with THINK New Ideas, Inc. ("THINK New Ideas"). The mergers with triSpan and THINK New Ideas were accounted for using the pooling-of-interests method of accounting. All prior historical consolidated financial statements presented herein have been restated to include the financial position, results of operations, and cash flows of triSpan and THINK New Ideas.
Fiscal Year
The Company's fiscal year ends on the Friday closest to December 31. The fiscal year for the Company generally consists of a 52-week period. Fiscal years 2001, 2000 and 1999 ended on December 28, 2001, December 29, 2000 and December 31, 1999, respectively. References to a year in these consolidated 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.
Accounts Receivables and Allowances for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of our clients to make required payments. Management makes estimates of the uncollectibility of the accounts receivables. Management critically reviews accounts receivable and analyzes historical bad debts, past-due accounts, client credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts.
Other Receivables and Media Payable
Media payables represent media placement costs due to media providers on behalf of the Company's clients. Amounts in media payables that have been billed to the Company's customers are included in other receivables. The level of media payables and the related receivables vary with the timing of the Company's clients' media campaigns.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 two to seven years. Leasehold improvements are amortized on a straight-line basis over the term of the lease or the estimated useful life of the improvement, whichever is shorter. 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.
Goodwill and Other Intangible Assets
Goodwill represents the cost of acquired companies in excess of the fair-value of the net assets acquired. Goodwill is being amortized over 15 years on a straight-line basis. The Company recorded goodwill amortization expense of $6.6 million, $6.1 million and $4.3 million for the years ended December 28, 2001, December 29, 2000 and December 31, 1999, respectively. The carrying value of goodwill is subject to periodic reviews of realizability. The agreements pursuant to which the Company acquired certain companies (see Note 3) included provisions that required the Company to pay additional consideration if the acquired companies met certain goals. The value of any contingent consideration paid was recorded as additional goodwill. Accumulated amortization of goodwill amounted to $20.5 million and $13.9 million at December 28, 2001 and December 29, 2000, respectively.
Other intangible assets include the portion of the cost of acquired companies assigned to other intangible assets obtained through acquisitions and are being amortized over the expected discounted cash flows. The Company recorded amortization expense of intangible assets of $274,000 for the year ended December 28, 2001.
Revenue Recognition
The Company recognizes revenues for services as work is performed on a project-by-project basis adjusted for any anticipated losses in the period in which any such losses are identified. For projects charged on a time and materials basis, revenue is recognized based on the number of hours worked by consultants at an agreed-upon rate per hour. The Company also undertakes projects on a fixed-fee or capped-fee basis for which revenues are recognized on the percentage of completion method of accounting based on the evaluation of actual costs incurred to date compared to total estimated costs. Fee revenue from advertising commissions is recognized when media placements appear on television, radio or in print. Net revenues exclude reimbursable expenses charged to clients.
Stock Compensation
The Company measures compensation expense related to the grant of stock
options and stock-based awards to employees in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees. In accordance with APB Opinion No. 25, compensation expense, if
any, is generally based on the difference between the exercise price of an
option, or the amount paid for an award, and the market price or fair value of
the underlying common stock at the date of the award or at the measurement date
for variable awards. Stock-based compensation arrangements involving
non-employees are accounted for under Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, under which
such arrangements are accounted for based on the fair value of the option or
award. As required by SFAS No. 123, the Company discloses pro forma net income
(loss) and net income (loss) per share information reflecting the effect of
applying SFAS No. 123 fair value measurement to employee arrangements.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. With regard to common shares issued to employees under employment
agreements, the calculation includes only the vested portion of such shares.
Accordingly, common shares outstanding for the basic net income (loss) per share
computation is lower than actual shares issued and outstanding. Included in the
common shares outstanding for the basic net income per share computation for the
year ended December 29, 2000 were an estimated 1,443,466 shares (based on the
share price on December 29, 2000) related to an earn-out to be paid in the
Company's common stock in March 2001 (see Note 3). In March 2001, the Company
issued 755,374 shares (based on the average share price on the last three days
of February 2001) of the Company's common stock for the earn-out.
Income (loss) per share assuming dilution is computed by dividing the net income (loss) by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period. Potentially dilutive shares were excluded from the diluted loss per share calculation for the year ended December 28, 2001 because their effects would have been anti-dilutive to the loss incurred by the Company. Therefore, the amounts reported for basic and diluted net loss per share were the same for that year. Potentially dilutive shares that were not included in the diluted loss per share calculation as of December 28, 2001 included 1,444,392 shares of unvested common stock issued under employment agreements and 860,751 shares issuable upon the exercise of stock options and warrants assuming the treasury stock method. For the years ended December 29, 2000 and December 31, 1999, potentially dilutive securities included 3,681,880 shares and 6,784,108 shares, respectively, of unvested common stock issued under employment agreements and 1,193,050 shares and 1,360,669 shares, respectively, issuable upon the exercise of stock options and warrants assuming the treasury stock method.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents, accounts receivable and unbilled revenue, other receivables, accounts payable, accrued expenses and other liabilities, and media payable. At December 28, 2001 and December 29, 2000, the fair value of these instruments approximated their carrying value.
Concentration of Credit Risk
The Company provides services primarily to Global 2000 companies and other sophisticated buyers of business consulting and IT services. The Company performs ongoing credit evaluations of its major customers and maintains reserves for potential credit losses. For the year ended December 28, 2001, two customers each had revenues greater than 5% of total net revenues. In the aggregate, these two customers accounted for approximately 30% of total net revenues. For the year ended December 29, 2000, one customer accounted for approximately 11% of net revenues. No single customer accounted for more than 5% of net revenues for the year ended December 31, 1999.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Management's Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
Segment Reporting
The Company engages in business activities in one operating segment, which provides technology-enabled business transformation solutions.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations, effective for all business combinations completed after June 30, 2001, and No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. SFAS 141 eliminates the pooling-of-interest method for business combinations and requires the application of the purchase method. Under SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their estimated useful lives. Under the provisions of SFAS 142, goodwill and indefinite lived intangible assets arising from a business combination completed after June 30, 2001 will not be amortized even though a company has not otherwise adopted SFAS 142. Accordingly, the Company adopted the provisions of SFAS 142 in its accounting for the acquisition completed on August 26, 2001 and therefore, the goodwill resulting from this acquisition is not being amortized. The Company will apply the provisions of SFAS 142 to its remaining goodwill and intangible assets beginning in the first quarter of 2002. Application of the non-amortization provisions of SFAS 142 is expected to result in an increase in net income of $6.0 million per year. During 2002, the Company will perform the first of the required annual impairment tests of goodwill and indefinite lived intangible assets as of December 29, 2001. The Company has not yet determined what the effect of these tests will be on the earnings and financial position of the Company.
In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), Accounting for the Impairment or Disposal of Long Lived Assets. SFAS 144 is effective for fiscal years beginning after December 15, 2001 and supersedes Statement of Financial Accounting Standards No. 121, while retaining many of the requirements of such statement. The Company is currently evaluating the effect that such adoption may have on its consolidated results of operations and financial position.
In November 2001, the Emerging Issues Task Force issued Topic No. D-103, Income Statement Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred, effective for fiscal years beginning after December 15, 2001. In accordance with Topic No. D-103, reimbursements received for out-of-pocket expenses incurred should be characterized as revenue in the statement of operations. The Company has historically accounted for reimbursements received for out-of-pocket expenses incurred as a reduction to project personnel and expenses in the statement of operations. The Company will adopt Topic No. D-103 in financial reporting periods beginning after December 28, 2001 and comparative financial statements for prior periods will be reclassified to comply with the guidance in Topic No. D-103. During the years ended December 28, 2001, December 29, 2000 and December 31, 1999, reimbursed out-of-pocket expenses totaled $31.8 million, $39.4 million and $29.3 million, respectively. Accordingly, if the provisions of Topic No. D-103 had been adopted during these years ended, revenues and project personnel and expenses would have been higher by the amounts noted. The Company's net income would not have changed but gross profit as a percentage of total revenues would have decreased.
Reclassifications
Certain prior year amounts in the consolidated financial statements have been reclassified to conform with the current year presentation.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. MERGERS
On February 26, 1999, the Company merged with triSpan, an internet commerce consulting firm that provides Internet consulting, web application development and integration services. The merger was accomplished through an exchange of 689,880 shares of the Company's common stock for all the outstanding shares of common stock of triSpan. Each outstanding share of common stock of triSpan was converted into 0.311 shares of the Company's common stock.
On November 5, 1999, the Company merged with THINK New Ideas, a provider of Internet-focused interactive marketing and branding services to Fortune 500 and other high profile clients. The merger was accomplished through an exchange of 7,550,673 shares of the Company's common stock for all the outstanding shares of common stock of THINK New Ideas. Each outstanding share of common stock of THINK New Ideas was converted into 0.70 shares of the Company's common stock.
The mergers with triSpan and THINK New Ideas were accounted for using the pooling-of-interests method of accounting. All prior historical consolidated financial statements presented herein have been restated to include the financial position, results of operations, and cash flows of triSpan and THINK New Ideas.
Merger related expenses of $11.7 million during the year ended December 31, 1999 related to the Company's mergers with triSpan and Think New Ideas. The expenses included investment banking, legal and accounting fees, severance costs for redundant employees as well as the costs of combining operations and eliminating redundant facilities.
Separate results of Answerthink, triSpan, and THINK New Ideas for the year ended December 31, 1999 prior to the consummation of the mergers are as follows (in thousands):
THINK New
Answerthink triSpan Ideas Combined
-------------- ------------- -------------- -------------
Total revenue $ 211,145 $ 2,274 $ 47,041 $ 260,460
Net income (loss) $ 5,665 $ (1,016) $ (3,515) $ 1,134
|
3. ACQUISITIONS AND INVESTING ACTIVITIES
During the three year period ended December 28, 2001, the Company acquired five businesses providing information technology, e-commerce and marketing services (collectively, the "Acquired Entities") in separate transactions. One was completed in 2001 and four were completed in 1999. Aggregate consideration, including contingent consideration earned, for the Acquired Entities was $38.0 million. This amount has been allocated, on an entity-by-entity basis, to the assets acquired and liabilities assumed based on their respective fair values on the dates of acquisition. Contingent consideration earned consisted of shares of common stock and cash of approximately $13.1 million and was based on the Acquired Entities achieving certain performance targets over various periods through March 2001. During 2000, the Company recorded a liability of $5.2 million for an earned contingent consideration to be paid in the Company's common stock in March 2001. The amount was included in accrued expenses and other liabilities in the consolidated balance sheet as of December 29, 2000. In March 2001, the Company issued 755,374 shares of the Company's common stock for the earned contingent consideration.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS AND INVESTING ACTIVITIES (CONTINUED)
The components of the purchase price allocation for the Acquired Entities, contingent consideration earned for acquisitions, and fees and expenses incurred are as follows (in thousands):
2001 2000 1999
-------------- -------------- --------------
Fair value of net assets (excluding cash) acquired $ 150 $ (250) $ (60)
Goodwill 1,992 18,165 33,773
Common stock issued (5,233) (8,122) (21,435)
Stock options issued -- -- (1,360)
Earn-out payable in common stock 5,233 (5,233) --
-------------- -------------- --------------
Cash used in acquisitions of businesses, net of cash acquired $ 2,142 $ 4,560 $ 10,918
============== ============== ==============
|
These acquisitions have been accounted for using the purchase method of accounting. Accordingly, the results of the acquisitions are included in the Company's consolidated results of operations from the respective dates of acquisition. For each acquisition, the excess of the purchase price of the acquisition over the estimated fair value of the net identifiable assets acquired and any contingent consideration have been recorded as goodwill. For acquisitions completed on or prior to June 30, 2001, the amounts allocated to goodwill have been amortized over 15 years. For the acquisition completed after June 30, 2001, the goodwill is not being amortized in accordance with the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. The pro forma impact of the acquisition completed in 2001 was not significant to the results of the Company's consolidated operations for the year ended December 28, 2001.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
December 28, December 29,
2001 2000
--------------- -------------
Equipment $ 17,306 $ 16,750
Furniture and fixtures 1,535 1,416
Leasehold improvements 10,956 7,237
--------------- -------------
29,797 25,403
Less accumulated depreciation (11,329) (10,748)
--------------- -------------
$ 18,468 $ 14,655
=============== =============
|
Depreciation expense for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 was $5.5 million, $5.5 million and $4.5 million, respectively.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consists of the following (in thousands):
December 28, December 29,
2001 2000
-------------- --------------
Accrued compensation and benefits $ 7,023 $ 13,957
Accrued merger related expenses 531 2,619
Earn-out payable in common stock -- 5,233
Accrued restructuring related expenses 5,677 2,900
Deferred revenue 8,812 7,818
Employee stock purchase plan payable 1,652 2,178
Other accrued expenses 4,297 4,565
-------------- --------------
$ 27,992 $ 39,270
============== ==============
|
6. BORROWINGS UNDER REVOLVING CREDIT FACILITIES
The Company has a $15.0 million revolving credit facility (the "Credit Facility") which expires on November 28, 2003. Borrowings under this Credit Facility bear interest at varying rates, principally LIBOR plus 1.50-2.00%. The Credit Facility includes covenants relating to the maintenance of certain financial ratios. No borrowings were outstanding under this line of credit as of December 28, 2001 and December 29, 2000.
7. REDEEMABLE SUBORDINATED NOTES
On June 26, 1998, triSpan received $8.0 million from the issuance of 8.0% Redeemable Subordinated Notes (the "Subordinated Notes"). In connection with the issuance of the Subordinated Notes, triSpan also issued detachable warrants (which were exercised prior to triSpan's merger with Answerthink) to purchase 338,011 shares of common stock with an exercise price of $3.86 per share to the holders of the Subordinated Notes. Using the Black-Scholes options-pricing model, the estimated fair value of the warrants was calculated at $3.8 million and was recorded as a reduction in the carrying amount of the Subordinated Notes, with a corresponding increase in shareholders' equity during 1998. The Subordinated Notes were repaid when triSpan and Answerthink merged, resulting in an extraordinary loss on early extinguishment of debt, net of taxes, of $2.1 million during the year ended December 31, 1999.
8. LEASE COMMITMENTS
The Company has operating lease agreements for its premises that expire on various dates through 2015. Rent expense for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 was $6.5 million, $6.1 million and $5.2 million, respectively. Additionally, approximately $1.6 million of rent expense for the year ended December 28, 2001, was charged to accrued restructuring and merger related expenses.
Future minimum lease commitments under non-cancelable operating leases for premises having a remaining term in excess of one year at December 28, 2001 are as follows (in thousands):
2002 $ 9,434
2003 7,999
2004 6,849
2005 5,392
2006 5,290
Thereafter 30,408
------------
65,372
Less: sublease income 13,135
------------
Total minimum lease payments , less sublease income $ 52,237
============
|
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows (in thousands):
Year Ended
--------------------------------------------
December 28, December 29, December 31,
2001 2000 1999
------------- ------------- --------------
Current tax expense (benefit)
Federal $ (224) $ 5,710 $ 8,531
State 223 1,404 1,734
------------- ------------- --------------
(1) 7,114 10,265
Deferred tax benefit
Federal (117) (388) (2,184)
State (43) 213 (479)
------------- ------------- --------------
(160) (175) (2,663)
------------- ------------- --------------
Income taxes $ (161) $ 6,939 $ 7,602
============= ============= ==============
|
A reconciliation of the Federal statutory tax rate with the effective tax rate is as follows:
Year Ended
---------------------------------------------
December 28, December 29, December 31,
2001 2000 1999
-------------- -------------- -------------
U.S. statutory rate (35.0)% 35.0% 35.0%
State income taxes, net of Federal income tax benefit 1.3 7.1 7.5
Valuation allowance 9.9 (8.4) (6.0)
Goodwill amortization 20.0 10.2 8.1
Merger related expenses -- -- 23.7
Miscellaneous items, net 1.9 2.9 1.8
-------------- -------------- -------------
Effective rate (1.9)% 46.8% 70.1%
============== ============== =============
|
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The components of the net deferred income tax asset are as follows (in thousands):
December 28, December 29,
2001 2000
------------- -------------
Deferred income tax assets
Purchased research and development $ 1,374 $ 1,416
Allowance for doubtful accounts 2,213 3,914
Net operating loss carryforward 1,340 413
Accrued expenses and other liabilities 2,831 1,452
------------- -------------
7,758 7,195
Valuation allowance (935) (202)
------------- -------------
6,823 6,993
Deferred income tax liabilities
Depreciation and amortization (1,480) (976)
Other items (382) (1,216)
------------- -------------
(1,862) (2,192)
------------- -------------
Net deferred income tax asset $ 4,961 $ 4,801
============= =============
|
An income tax receivable of $4.2 million and $4.6 million is included in prepaid expenses and other assets in the consolidated balance sheets as of December 28, 2001 and December 29, 2000, respectively. Current net deferred tax assets of $5.5 million and $5.8 million are included in prepaid expenses and other assets in the consolidated balance sheets as of December 28, 2001 and December 29, 2000, respectively. Net deferred tax liabilities of $573,000 and $974,000 are included in accrued expenses and other liabilities in the consolidated balance sheets as of December 28, 2001 and December 29, 2000, respectively.
At December 28, 2001 and December 29, 2000, the Company had established a valuation allowance of $935,000 and $202,000, respectively, to reduce deferred income tax assets related to net operating loss carryforwards. At December 28, 2001 and December 29, 2000, the Company had $4.2 million and $1.0 million, respectively, of net operating loss carryforwards available. The liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
10. SHAREHOLDERS' EQUITY
Common Stock Subject to Vesting Requirements
As of December 28, 2001 and December 29, 2000, the Company had outstanding common stock totaling 615,188 and 3,098,238, respectively, that are subject to certain vesting criteria. Answerthink sold the shares to its employees at nominal purchase prices per share in connection with Answerthink's formation in 1997. Each employee executed an employment agreement or a stock agreement with the Company providing for, among other things, the manner in which the shares will vest. In general, a certain percentage of 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.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
Shares of common stock subject to vesting requirements were issued in connection with certain acquisitions to the employees of those companies. Employees of the acquired companies vest in these shares over periods up to five years. The market value of the stock at the time of grant was recorded as unearned compensation in a separate component of shareholders' equity and amortized as compensation expense ratably over the vesting periods. There were no shares of unvested stock issued and outstanding under these agreements as of December 28, 2001. At December 29, 2000, there were 200,638 shares of unvested stock issued and outstanding under these agreements.
Securities Purchase Agreement
In March 1999, THINK New Ideas entered into a securities purchase agreement (the "Securities Purchase Agreement") with Capital Ventures International and Marshall Capital Management, Inc. (the "Purchasers") whereby the Purchasers agreed to purchase shares of common stock and warrants to acquire shares of common stock. Pursuant to the Securities Purchase Agreement, on March 5, 1999, THINK New Ideas issued, for proceeds of $6 million, 609,799 shares of its common stock at $9.84 per share and warrants to purchase an additional 121,961 shares of common stock exercisable for a five-year term, at an exercise price of $14.76.
At any time prior to March 5, 2000 the Purchasers also had the right but not the obligation to purchase 371,353 additional shares of common stock at $13.46 per share, together with warrants for 1/5 share for each additional share purchased, exercisable at an exercise price of 150% of the market price on the date the related additional shares were purchased. Pursuant to the Securities Purchase Agreement, the additional shares were sold in March 2000 for $5.0 million and warrants to acquire 74,270 shares of common stock, exercisable for a five-year term, were issued at an exercise price of $36.94.
Stock Plans
Effective July 1, 1998, the Company adopted an Employee Stock Purchase Plan to provide substantially all employees who have completed three months of service as of the beginning of an offering period an opportunity to purchase shares of its common stock through payroll deductions, up to 10% of eligible compensation. Participant account balances are used to purchase shares of stock at the lesser of 85 percent of the fair market value of shares on the first trading day of the offering period or on the last trading day of such offering period. The aggregate fair market value, determined as of the first trading date of the offering period, as to shares purchased by an employee may not exceed $25,000 annually. The Employee Stock Purchase Plan expires on July 1, 2008. A total of 2,750,000 shares of common stock (increased from 750,000 shares per an amendment to the plan that was approved by the shareholders on May 9, 2001) are available for purchase under the plan with a limit of 400,000 shares of common stock to be issued per offering period.
For plan years 2001, 2000 and 1999, 298,210, 482,196 and 187,311 shares, respectively, were issued. In 2001, the Company granted stock options to participants in the Company's Employee Stock Purchase Plan. These options were granted in lieu of the Employee Stock Purchase Plan shares that could not be issued because the plan was oversubscribed for the purchase periods ending December 31, 2000 and June 30, 2001. The Company recorded a non-cash compensation charge of $4.2 million in the year ended December 28, 2001 based on the vesting provisions of the options for the difference between the fair market value of the stock on the option grant date and the exercise price. These options fully vested on June 30, 2001, therefore, operating results in future periods will not be impacted by this special grant.
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
The Company has granted stock options to employees and directors of the Company at exercise prices equal to the market value of the stock at the date of grant. The options generally vest ratably over periods ranging from four years to six years with a maximum term of 10 years. The Company has authorized 22,723,850 shares of common stock for option grants.
On June 27, 2001, the Company filed with the Securities and Exchange Commission a Schedule TO describing a program offering a voluntary stock option exchange for the Company's employees. The offering period for the stock option exchange ended on August 8, 2001. Under the program, employees holding nonqualified options to purchase the Company's common stock or incentive stock options to purchase the Company's common stock with an exercise price of $10.00 per share or more were given the opportunity to exchange their existing options for new options to purchase shares of the Company's common stock equal in number to 66 2/3% of the number of options tendered and accepted for exchange. The new options were granted on February 9, 2002, which was six months and one day after acceptance of the old options for exchange and cancellation. The exercise price of the new options was $6.03, which was the last reported sale price of the Company's common stock on the Nasdaq Stock Market's National Market on February 8, 2002. Options for 12,331,757 shares of the Company's common stock were eligible for participation and options for 4,400,893 shares were tendered in the exchange program. Under the exchange program, the Company granted 2,479,699 shares (net of forfeitures) of the Company's common stock.
The Company applies APB No. 25 and related interpretations in accounting for its stock option plans. Under SFAS No. 123, compensation cost for the Company's stock-based compensation plans would be determined based on the fair value at the grant dates for awards under those plans. Had the Company adopted SFAS No. 123 in accounting for its stock option plans the Company's consolidated net income (loss) and net income (loss) per share for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 would have been adjusted to the pro forma amounts indicated as follows (in thousands, except per share data):
Year Ended
--------------------------------------------
December 28, December 29, December 31,
2001 2000 1999
-------------- ------------- -------------
Net income (loss)
As reported $ (8,519) $ 7,901 $ 1,134
Pro forma $ (13,448) $ 81 $ (7,816)
Basic net income (loss) per common share
As reported $ (0.19) $ 0.20 $ 0.03
Pro forma $ (0.31) $ 0.00 $ (0.22)
Diluted net income (loss) per common share
As reported $ (0.19) $ 0.18 $ 0.03
Pro forma $ (0.31) $ 0.00 $ (0.22)
|
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SHAREHOLDERS' EQUITY (CONTINUED)
The following assumptions were used by the Company to determine the fair value of stock options granted using the Black-Scholes options-pricing model:
Year Ended
----------------------------------------------------
December 28, December 29, December 31,
2001 2000 1999
---------------- ---------------- ----------------
Expected volatility 100% 100% 96%
Average expected option life 4 years 4 years 4 years
Risk-free rate 4.5% 5.5% 5.6%
Dividend yield 0% 0% 0%
|
Stock option activity under the Company's stock option plans is summarized as follows:
Year Ended
--------------------------------------------------------------------------------
December 28, 2001 December 29, 2000 December 31, 1999
-------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Option Exercise Option Exercise Option Exercise
Shares Price Shares Price Shares Price
-------------- ----------- ------------ ------------ -------------- ----------
Outstanding at beginning of year 9,871,253 $ 19.84 7,351,535 $ 16.58 4,511,096 $ 12.31
Granted 5,945,286 4.83 6,312,584 23.08 4,772,630 20.02
Exercised (742,015) 3.19 (485,520) 7.84 (644,974) 8.90
Canceled (8,262,080) 20.34 (3,307,346) 20.35 (1,287,217) 18.30
-------------- ----------- ------------ ------------ -------------- ----------
Outstanding at end of year 6,812,444 $ 8.42 9,871,253 $ 19.84 7,351,535 $ 16.58
============== =========== ============ ============ ============== ==========
Weighted average fair value of
options granted during the period $ 3.43 $ 16.22 $ 13.97
-------------- ------------ --------------
|
The following table summarizes information about the Company's stock options outstanding at December 28, 2001:
Options Outstanding Options Exercisable
------------------------------------------------------ ------------------------------------
Weighted Average
Remaining
Range of Exercise Number Contractual Weighted Average Number Weighted Average
Prices Outstanding Life (Years) Exercise Price Exercisable Exercise Price
------------------- ---------------- ----------------- ----------------- ---------------- ------------------
$1.16 - $2.50 196,818 5.2 $ 2.47 162,554 $ 2.48
$3.08 - $3.77 2,313,523 6.6 $ 3.49 571,577 $ 3.08
$4.66 - $6.86 1,190,473 8.5 $ 5.76 129,226 $ 5.87
$7.08 - $9.97 1,194,189 8.6 $ 8.64 222,653 $ 8.94
$10.46 - $14.44 746,481 6.5 $ 11.31 460,305 $ 11.34
$16.25 - $18.50 824,972 7.5 $ 17.06 350,675 $ 17.25
$19.25 - $24.50 160,468 6.7 $ 21.02 76,731 $ 20.61
$25.25 - $34.25 185,520 6.0 $ 30.81 69,820 $ 30.06
---------------- ----------------- ----------------- ---------------- ------------------
6,812,444 7.3 $ 8.42 2,043,541 $ 9.72
================ ================= ================= ================ ==================
|
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. BENEFIT PLAN
The Company maintains a 401(k) plan covering all eligible employees. Subject to certain dollar limits, eligible employees may contribute up to 15% of their pre-tax annual compensation to the plan. The Company may make discretionary contributions on an annual basis. During fiscal year 2001, the Company made matching contributions of 25% of employee contributions up to 4% of their gross salaries. The Company's matching contributions amounted to approximately $736,000 for the year ended December 28, 2001. The Company made no matching contributions in fiscal years 2000 and 1999.
12. RESTRUCTURING COSTS
Restructuring costs were $8.5 million and $3.7 million in 2001 and 2000, respectively. In 2001, costs consisted of $4.3 million for reduction in consultants and functional support personnel and $4.2 million for closure and consolidation of facilities and related exit costs. The 2000 costs related to the reduction in consultants and functional support personnel and the closure and consolidation of facilities and related exit costs. These actions were taken as a result of the continued decline in demand for technology services in the latter portion of 2000 and throughout 2001. The Company took steps to reduce its costs to better align its overall cost structure and organization with anticipated demand for its services. The 2001 restructuring plan involved the involuntary termination of approximately 260 employees. Approximately 200 employees were terminated by December 28, 2001. The Company has subleased or is attempting to sublease the vacated space.
The following table sets forth the detail and activity in the restructuring expense accrual during the year ended December 28, 2001 (in thousands):
Accrual Balance Accrual Balance
at December 29, Additions to at December 28,
2000 Accrual Expenditures 2001
---------------- ---------------- ---------------- ---------------
Severance and other employee costs $ 1,686 $ 4,253 $ (4,786) $ 1,153
Closure and consolidation of facilities and
related exit costs 1,214 4,236 (926) 4,524
---------------- ---------------- --------------- ----------------
Total restructuring accrual $ 2,900 $ 8,489 $ (5,712) $ 5,677
================ ================ =============== ================
|
13. LITIGATION
On September 25, 1998, Michael R. Farrell, a shareholder of THINK New Ideas, filed a class action suit, Farrell v. THINK New Ideas, Inc., Scott Mednick, Melvin Epstein and Ronald Bloom, No. 98 Civ. 6809, against THINK New Ideas, Ronald Bloom, a former officer of THINK New Ideas and a former member of the Company's Board of Directors, Melvin Epstein and Scott Mednick, both former officers of THINK New Ideas. The suit was filed in the United States District Court for the Southern District of New York on behalf of all persons who purchased or otherwise acquired shares of THINK New Ideas' common stock in the class period from November 14, 1997, through September 21, 1998.
On various dates in October 1998, six additional class action suits were filed in the same court against the same parties by six different individuals, each representing a class of purchasers of THINK New Ideas' common stock. All seven of these lawsuits were consolidated by order of the court dated December 15, 1998 into one action titled In Re: THINK New Ideas, Inc., Consolidated Securities Litigation, No. 98 Civ. 6809 (SHS).
Pursuant to an order of the court, the plaintiffs filed a Consolidated and Amended Class Action Complaint on February 10, 1999 (the "Consolidated Complaint"). The Consolidated Complaint superceded all prior complaints in all of the cases and served as the operative complaint in the consolidated class action. The Consolidated Complaint was filed on behalf of all individuals who purchased THINK New Ideas' common stock from November 5, 1997 through September 21, 1998. The Consolidated Complaint contained substantially similar allegations as the complaint filed by Farrell, including that THINK New Ideas and certain of its current and former officers and directors disseminated materially false and misleading information about THINK New Ideas' financial position and results of operations through certain public statements and in
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. LITIGATION (CONTINUED)
certain documents filed by THINK New Ideas with the Securities and Exchange Commission; that these statements and documents caused the market price of THINK New Ideas' common stock to be artificially inflated; that the plaintiffs purchased shares of common stock at such artificially inflated prices and, as a consequence of such purchases suffered damages. The relief sought in the Consolidated Complaint was unspecified, but included a plea for compensatory damages and interest, punitive damages, reasonable costs and expenses, including attorneys' fees and expert fees and such other relief as the court deemed just and proper.
This lawsuit became the Company's responsibility upon the merger of Answerthink and THINK New Ideas. Prior to the merger, THINK New Ideas filed a motion to dismiss the Consolidated Complaint on a number of grounds. The plaintiffs filed a motion in opposition. On March 15, 2000, the court granted the defendant's motion to dismiss the Consolidated Complaint. The plaintiffs filed a Second Consolidated and Amended Class Action Complaint (the "Second Amended Complaint") on April 14, 2000. The defendants filed a motion to dismiss the Second Amended Complaint on May 1, 2000. On September 14, 2000, the court denied the motion. The defendants filed an answer to the Second Amended Complaint on November 10, 2000. The deadline for fact discovery was February 22, 2002. The plaintiffs' motion for class certification is pending before the court. The defendants have until April 5, 2002 to file an opposition to that motion. The Company believes there are meritorious defenses to the claims made in the Second Amended Complaint and intends to contest those claims vigorously. Although there can be no assurance as to the outcome of these matters, an unfavorable resolution could have a material adverse effect on the results of operations and/or financial condition of the Company in the future.
In June 2000, pursuant to a confidential settlement agreement, the Company settled litigation in which it was the plaintiff. The Company recorded a gain of $1.85 million as a result of this settlement.
The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such other matters will not have a material adverse effect on the financial position or results of operations of the Company.
14. RELATED PARTY TRANSACTIONS
During 2000 and 1999, the Company recognized approximately $16.7 million and $2.1 million, respectively, in sales to related parties in which the Company has non-controlling equity interests or whereby a director of the Company holds equity interests in such clients or is a director of such company. The Company had receivables due from these entities of approximately $788,000 and $7.9 million, and payables due to these entities of approximately $443,000 and $-0-, at December 28, 2001 and December 29, 2000, respectively.
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents unaudited supplemental quarterly financial information for the years ended December 28, 2001 and December 29, 2000 (in thousands, except per share data):
Quarter Ended
-------------------------------------------------------------
March 30, June 29, September 28, December 28,
2001 2001 2001 2001
-------------- -------------- -------------- --------------
Net revenues $ 72,015 $ 65,276 $ 60,016 $ 50,154
Income (loss) from operations (798) (605) 728 (9,062)
Income (loss) before income taxes (364) (388) 936 (8,864)
Net income (loss) (200) 65 (2,195) (6,189)
Basic net income (loss) per common share $ -- $ -- $ (0.05) $ (0.14)
Diluted net income (loss) per common share $ -- $ -- $ (0.05) $ (0.14)
|
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
Quarter Ended
-------------------------------------------------------------
March 31, June 30, September 29, December 29,
2000 2000 2000 2000
-------------- -------------- -------------- --------------
Net revenues $ 76,297 $ 81,729 $ 84,064 $ 69,046
Income (loss) from operations 8,805 9,798 10,923 (15,314)
Income (loss) before income taxes 9,077 11,815 11,200 (17,252)
Net income (loss) 5,355 6,971 6,608 (11,033)
Basic net income (loss) per common share $ 0.14 $ 0.17 $ 0.16 $ (0.26)
Diluted net income (loss) per common share $ 0.12 $ 0.16 $ 0.15 $ (0.26)
|
Quarterly basic and diluted net income or loss per common share were computed independently for each quarter and do not necessarily total to the year to date basic and diluted net income (loss) per common share.
ANSWERTHINK, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 28, 2001, DECEMBER 29, 2000 AND DECEMBER 31, 1999
(in thousands)
Balance at Balance at
Allowance for Doubtful Accounts Beginning of Charge to Ending of
Year Expense Write-offs Year
------------- ------------- ------------- ------------
December 31, 1999 $ 1,988 $ 1,357 $ (1,835) $ 1,510
============= ============= ============= ============
December 29, 2000 $ 1,510 $ 12,982 $ (3,370) $ 11,122
============= ============= ============= ============
December 28, 2001 $ 11,122 $ 5,279 $ (9,591) $ 6,810
============= ============= ============= ============
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information responsive to this Item is incorporated herein to the Company's definitive 2002 proxy statement for the 2002 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
Information responsive to this Item is incorporated herein to the Company's definitive 2002 proxy statement for the 2002 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information responsive to this Item is incorporated herein to the Company's definitive 2002 proxy statement for the 2002 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information responsive to this Item is incorporated herein to the Company's definitive 2002 proxy statement for the 2002 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Form:
1. Financial Statements
The Consolidated Financial Statements filed as part of this report are listed and indexed on page 25. Schedules other than those listed in the index have been omitted because they are applicable or the required information has been included elsewhere in this report.
2. Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts and Reserves are included in this report. Schedules other than those listed in the index have been omitted because they are inapplicable or the information required to be set forth therein is contained, or incorporated by reference, in the Consolidated Financial Statements of Answerthink or notes thereto.
3. Exhibits: See Index to Exhibits on page 49.
The Exhibits listed in the accompanying Index to Exhibits are filed or incorporated by reference as part of this report.
(b) Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on the 26th day of March, 2002.
ANSWERTHINK, INC.
By: /s/ Ted A. Fernandez
------------------------------------------
Ted A. Fernandez
Chief Executive Officer and Chairman
|
Pursuant to the requirements of the Securities Act of 1934, this Form 10-K has been signed by the following persons in the capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
/s/ Ted A. Fernandez March 26, 2002
---------------------------------------- Chief Executive Officer and Chairman (Principal --------------------
Ted A. Fernandez Executive Officer)
/s/ John F. Brennan March 26, 2002
---------------------------------------- Executive Vice President, Finance and Chief --------------------
John F. Brennan Financial Officer (Principal Financial and Accounting
Officer)
/s/ Allan R. Frank March 26, 2002
---------------------------------------- President and Director ---------------------
Allan R. Frank
/s/ David N. Dungan March 26, 2002
---------------------------------------- Chief Operating Officer and Director
David N. Dungan
/s/ Robert J. Bahash March 26, 2002
---------------------------------------- Director ---------------------
Robert J. Bahash
/s/ Edwin A. Huston March 26, 2002
---------------------------------------- Director ---------------------
Edwin A. Huston
/s/ Jeffery E. Keisling March 26, 2002
---------------------------------------- Director ---------------------
Jeffrey E. Keisling
/s/ Alan T. G. Wix March 26, 2002
---------------------------------------- Director ---------------------
Alan T. G. Wix
|
INDEX TO EXHIBITS
Exhibit
No. Exhibit Description
3.1++++ Second Amended and Restated Articles of Incorporation of the Registrant, as amended
3.2++++ Amended and Restated Bylaws of the Registrant, as amended
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 dated as of March 15, 1998 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 the Registrant, GTCR V, MG, Gator and Tara
10.2+ Series A Preferred Stock Purchase Agreement dated February 24, 1998 among the Registrant, GTCR V,
GTCR Associates and Miller Capital
10.3+ Stock Purchase Agreement dated March 5, 1998 between the Registrant and FSC
10.4+ Second Amended and Restated Registration Rights Agreement dated as of May 5, 1998 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+ Second Amended and Restated Registration Rights Agreement dated as of May 5, 1998 among the Registrant
and the eight former shareholders of RTI
10.6*+ Registrant's 1998 Stock Option and Incentive Plan
10.7*^ Amendment to Registrant's 1998 Stock Option and Incentive Plan
10.8*+ Form of Senior Management Agreement dated April 23, 1997 between the Registrant and each of Messrs.
Fernandez, Frank and Knotts
10.9*++++ Senior Management Agreement dated July 11, 1997 between Registrant and Mr. Dungan
10.10*^ Form of Employment Agreement entered into between the Registrant and Mr. Dungan
10.11*+ Form of Employment Agreement entered into between the Registrant and each of Messers. Fernandez, Frank
and Knotts
10.12*^ Form of Separation Agreement dated May 18, 2001 between Registrant and Mr. Knotts
10.13+ Amendment No. 2 dated as of May 5, 1998 to Purchase Agreement dated April 23, 1997 among the
Registrant, GTCR V, MG, Gator and Tara
10.14+ Amendment No. 2 dated as of May 5, 1998 to Stock Purchase Agreement dated March 5, 1998 between the
Registrant and FSC
10.15*+ Amendment to Certain Senior Management Agreements dated March 27, 1998 among the Company, the
Board of Directors and each of Messrs. Fernandez, Frank, Knotts and Dungan
10.16*+ Second Amendment to Certain Senior Management Agreements dated May 26, 1998 among the Company,
the Board of Directors and each of Messrs. Fernandez, Frank, Knotts and Dungan
10.17*++ AnswerThink Consulting Group, Inc. Employee Stock Purchase Plan
10.18*^ Amendment to Registrant's Employee Stock Purchase Plan dated February 16, 2001
10.19*+++ Employment Agreement dated March 23, 1999 between the Registrant and Mr. Brennan
10.20*+++ Restricted Stock Agreement dated July 31, 1997 between the Registrant and Mr. Brennan
10.21*+++ Amendment to Restricted Stock Agreement dated March 27, 1998 between the Registrant and Mr. Brennan
10.22*+++ Form of Senior Management Agreement dated July 31, 1997 between the Registrant and Mr. Brennan
10.23+++++ Agreement and Plan of Merger dated as of June 24, 1999 by and among THINK New Ideas, Inc.,
AnswerThink Consulting Group, Inc. and Darwin Acquisition Corp.
10.24+++++ Company Voting Agreement dated as of June 24, 1999 by and among AnswerThink Consulting Group, Inc.,
Darwin Acquisition Corp. and the Stockholders of THINK New Ideas, Inc.
10.25+++++ Acquiror Voting Agreement dated as of June 24, 1999 by and among THINK New Ideas, Inc. and the
Stockholders of AnswerThink Consulting Group, Inc.
10.26+++++ Stock Option Agreement dated as of June 24, 1999 between THINK New Ideas, Inc. and AnswerThink
Consulting Group, Inc.
|
10.27++++++ Securities Purchase Agreement by and among THINK New Ideas, Inc., Capital Ventures International and
Marshall Capital Management, Inc.
10.28++++++ Registration Rights Agreement dated as of March 3, 1999 by and among THINK New Ideas, Inc., Capital
Ventures International and Marshall Capital Management, Inc.
10.29++++ Revolving Credit Agreement dated as of November 30, 2000 among Answerthink, Inc. and Fleet National
Bank
10.30^ First Amendment to Revolving Credit Agreement dated as of September 28, 2001 by and among the
Registrant, Fleet National Bank and certain other lending institutions thereto and Fleet National Bank, as
agent
21.1^ Subsidiaries of the Registrant
23.1^ Consent of PricewaterhouseCoopers LLP
23.1.1^ Consent of PricewaterhouseCoopers LLP
|
* Management agreement or compensatory plan or arrangement ^ Exhibits filed herewith. + Incorporated herein by reference to the Company's Registration Statement on Form S-1 (333-48123). ++ Incorporated herein by reference to the Company's Registration Statement on Form S-8 (333-69951). +++ Incorporated herein by reference to the Company's Form 10-K for the year ended January 1, 1999. ++++ Incorporated herein by reference to the Company's Form 10-K for the year ended December 29, 2000. +++++ Incorporated herein by reference to the Company's Form 8-K filed July 1, 1999. ++++++ Incorporated herein by reference to THINK New Ideas, Inc.'s Form 8-K dated March 12, 1999. |
EXHIBIT 10.7
ANSWERTHINK, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
Answerthink, Inc., a Florida corporation (the "Company"), sets forth herein the terms of its 1998 Stock Option and Incentive Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and retain highly qualified officers, key employees, outside directors and other persons, and to motivate such officers, key employees, outside directors and other persons to serve the Company and its affiliates (as defined herein) and to expend maximum effort to improve the business results and earnings of the Company, by providing to such officers, key employees, outside directors and other persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plan provides for the grant of stock options, restricted stock and restricted stock units in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein, except that stock options granted to outside directors shall in all cases be non-qualified stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:
2.1 "Affiliate" of, or person "affiliated" with, a person means any company or other trade or business that controls, is controlled by or is under common control with such person within the meaning of Rule 405 of Regulation C under the Securities Act.
2.2 "Award Agreement" means the stock option agreement, restricted stock agreement, restricted stock unit agreement or other written agreement between the Company and a Grantee that evidences and sets out the terms and conditions of a Grant.
2.3 "Beneficial Owner" means a beneficial owner within the meaning of Rule 13d-3 under the Exchange Act.
2.4 "Benefit Arrangement" shall have the meaning set forth in
Section 13 hereof.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Change of Control" means (A) any Person, other than any Person who is a Beneficial Owner of the Company's securities before the Effective Date, becomes, after the Effective Date, the beneficial owner, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities; (B) during any two-year period, individuals who at the beginning of such period constitute the Board (including, for this purpose, any director who after the beginning of such period filled a vacancy on the Board caused by the resignation, mandatory retirement, death, or disability of a director and whose election or appointment was approved by a vote of at least two-thirds of the directors then in office who were directors at the beginning of such period) cease for any reason to constitute a majority thereof; (C) notwithstanding clauses (A) or (E) of
this paragraph, the Company consummates a merger or consolidation of the Company with or into another corporation, the result of which is that the Persons who were stockholders of the Company at the time of the execution of the agreement to merge or consolidate own less than 80% of the total equity of the corporation surviving or resulting from the merger or consolidation or of a corporation owning, directly or indirectly, 100% of the total equity of such surviving or resulting corporation; or (D) the sale in one or a series of transactions of all or substantially all of the assets of the Company; (E) any Person has commenced a tender or exchange offer, or entered into an agreement or received an option to acquire beneficial ownership of 40% or more of the total number of voting shares of the Company, unless the Board has made a determination that such action does not constitute and will not constitute a material change in the Persons having control of the Company; or (F) there is a change of control in the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act other than in circumstances specifically covered by clauses (A) through (E) above.
2.7 "Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.
2.8 "Committee" means a committee of, and designated from time to time by resolution of, the Board, which shall consist of no fewer than two members of the Board, none of whom shall be an officer or other salaried employee of the Company or any affiliate of the Company.
2.9 "Company" means Answerthink, Inc.
2.10 "Effective Date" means April 23, 1998, the date on which the Plan was adopted by the Board.
2.11 "Exchange Act" means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.
2.12 "Fair Market Value" means the value of a share of Stock, determined as follows: if on the Grant Date or other determination date the Stock is listed on an established national or regional stock exchange, is admitted to quotation on the NASDAQ National Market, or is publicly traded on an established securities market, the Fair Market Value of a share of Stock shall be the closing price of the Stock on such exchange or in such market (the highest such closing price if there is more than one such exchange or market) on the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of Stock is reported for such trading day, on the next preceding day on which any sale shall have been reported. If the Stock is not listed on such an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value of the Stock as determined by the Board in good faith.
2.13 "Grant" means an award of an Option, Restricted Stock or Restricted Stock Units under the Plan.
2.14 "Grant Date" means, as determined by the Board or authorized Committee, (i) the date as of which the Board or such Committee approves a Grant, (ii) the date on which the
recipient of such Grant first becomes eligible to receive a Grant under Section 6, hereof, or (iii) such other date as may be specified by the Board or such Committee.
2.15 "Grantee" means a person who receives or holds an Option, Restricted Stock or Restricted Stock Units under the Plan.
2.16 "Immediate Family Members" means the spouse, children and grandchildren of the Grantee.
2.17 "Incentive Stock Option" means an "incentive stock option" within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.
2.18 "Option" means an option to purchase one or more shares of Stock pursuant to the Plan.
2.19 "Option Period" means the period during which Options may be exercised as set forth in Section 10 hereof.
2.20 "Option Price" means the purchase price for each share of Stock subject to an Option.
2.21 "Other Agreement" shall have the meaning set forth in Section 13 hereof.
2.22 "Outside Director" means a member of the Board who is not an officer or employee of the Company.
2.23 "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 governmental entity or any department, agency or political subdivision thereof.
2.24 "Plan" means this Answerthink, Inc. 1998 Stock Option and Incentive Plan.
2.25 "Reporting Person" means a person who is required to file reports under Section 16(a) of the Exchange Act.
2.26 "Restricted Period" means the period during which Restricted Stock or Restricted Stock Units are subject to restrictions or conditions pursuant to Section 12.2 hereof.
2.27 "Restricted Stock" means shares of Stock, awarded to a Grantee pursuant to Section 12 hereof, that are subject to restrictions and to a risk of forfeiture.
2.28 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to Section 12 hereof, which represents a conditional right to receive a share of Stock in the future, and which is subject to restrictions and to a risk of forfeiture.
2.29 "Securities Act" means the Securities Act of 1933, as now in effect or as hereafter amended.
2.30 "Service Provider" means a consultant or adviser to the Company, a manager of the Company's properties or affairs, or other similar service provider or affiliate of the Company, and employees of any of the foregoing, as such persons may be designated from time to time by the Board pursuant to Section 6 hereof.
2.31 "Stock" means the common stock, par value $0.01 per share, of the Company.
2.32 "Subsidiary" means any "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code.
2.33 "Termination Date" shall be the date upon which an Option shall terminate or expire, as set forth in Section 10.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1 BOARD.
The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company's certificate of incorporation and by-laws and applicable law. The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Grant or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan, any Grant or any Award Agreement. All such actions and determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting or by unanimous consent of the Board executed in writing in accordance with the Company's certificate of incorporation and by-laws and applicable law. The interpretation and construction by the Board of any provision of the Plan, any Grant or any Award Agreement shall be final and conclusive. As permitted by law, the Board may delegate its authority under the Plan to a member of the Board of Directors or an executive officer of the Company.
3.2 COMMITTEE.
The Board from time to time may delegate to a Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 above and in other applicable provisions, as the Board shall determine, consistent with the certificate of incorporation and by-laws of the Company and applicable law. In the event that the Plan, any Grant or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken by or such determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in this Section. Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive. As permitted by law, the Committee may delegate its authority under the Plan to a member of the Board of Directors or an executive officer of the Company.
3.3 GRANTS.
Subject to the other terms and conditions of the Plan, the Board shall have full and final authority (i) to designate Grantees, (ii) to determine the type or types of Grant to be made to a Grantee, (iii) to determine the number of shares of Stock to be subject to a Grant, (iv) to establish
the terms and conditions of each Grant (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of a Grant or the shares of Stock subject thereto, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options), (v) to prescribe the form of each Award Agreement evidencing a Grant, and (vi) to amend, modify, or supplement the terms of any outstanding Grant. Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to modify Grants to eligible individuals who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom. As a condition to any subsequent Grant, the Board shall have the right, at its discretion, to require Grantees to return to the Company Grants previously awarded under the Plan. Subject to the terms and conditions of the Plan, any such new Grant shall be upon such terms and conditions as are specified by the Board at the time the new Grant is made.
3.4 NO LIABILITY.
No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Grant or Award Agreement.
3.5 APPLICABILITY OF RULE 16B-3
Those provisions of the Plan that make express reference to Rule 16b-3 under the Exchange Act shall apply only to Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 16 hereof, the number of shares of Stock available for issuance under the Plan shall be (i) 20,000,000, no more than 5,000,000 of which may be issued pursuant to awards of Restricted Stock or Restricted Stock Units and (ii) any shares of Stock that are represented by awards previously granted by the Company, including awards granted under the Answerthink, Inc. 1997 Stock Option Plan and the Answerthink, Inc. Restricted Stock Plan as of the Effective Date (the "Prior Plans"). Notwithstanding the foregoing, subject to Section 16 hereof, the maximum aggregate number of shares of Stock available for grants of Incentive Stock Options shall be 10,000,000. All stock options previously granted by the Company shall be deemed to be grants of Options pursuant to the Plan. Stock issued or to be issued under the Plan shall be authorized but unissued shares. If any shares covered by a Grant, including Grants made prior to the Effective Date, are not purchased or are forfeited, or if a Grant otherwise terminates without delivery of any Stock subject thereto, then the number of shares of Stock counted against the aggregate number of shares available under the Plan with respect to such Grant shall, to the extent of any such forfeiture or termination, again be available for making Grants under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 EFFECTIVE DATE.
The Plan shall be effective as of the Effective Date, subject to approval of the Plan within one year of the Effective Date, by a majority of the votes cast on the proposal at a meeting of shareholders, provided that the total votes cast represent a majority of all shares entitled to vote or by the written consent of the holders of a majority of the Company's shares entitled to vote. Upon approval of the Plan by the shareholders of the Company as set forth above, all Grants made under the Plan on or after the Effective Date shall be fully effective as if the shareholders of the Company had approved the Plan on the Effective Date. If the shareholders fail to approve the Plan within one year after the Effective Date, any Grants made hereunder shall be null and void and of no effect.
5.2 TERM.
The Plan has no termination date; however, no Incentive Stock Option may be granted under the Plan on or after the tenth anniversary of the Effective Date.
6. OPTION GRANTS
6.1 COMPANY OR SUBSIDIARY EMPLOYEES.
Grants (including Grants of Incentive Stock Options) may be made under the Plan to any employee of, or Service Provider or employee of a Service Provider providing, or who has provided, services to, the Company or of any Subsidiary, including any such employee who is an officer or director of the Company or of any Subsidiary, as the Board shall determine and designate from time to time.
6.2 SUCCESSIVE GRANTS.
An eligible person may receive more than one Grant, subject to such restrictions as are provided herein.
7. LIMITATIONS ON GRANTS
7.1 LIMITATION ON SHARES OF STOCK SUBJECT TO GRANTS.
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, no person eligible for a Grant under Section 6 hereof may be awarded Options in any calendar year exercisable for greater than 3,000,000 shares of Stock (subject to adjustment as provided in Section 16 hereof). During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, the maximum number of shares of Restricted Stock that can be awarded under the Plan (including for this purpose any shares of Stock represented by Restricted Stock Units) to any person eligible for a Grant under Section 6 hereof is 3,000,000 per calendar year (subject to adjustment as provided in Section 16 hereof).
7.2 LIMITATIONS ON INCENTIVE STOCK OPTIONS.
An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock with respect to which
all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee's employer and its affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted.
8. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing a Grant of Options shall specify whether such Options are intended to be non-qualified stock options or Incentive Stock Options, and in the absence of such specification such options shall be deemed non-qualified stock options.
9. OPTION PRICE
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1 VESTING AND OPTION PERIOD.
Subject to Sections 10.2 and 16.3 hereof, each Option granted under the Plan shall become exercisable at such times and under such conditions as shall be determined by the Board and stated in the Award Agreement. For purposes of this Section 10.1, fractional numbers of shares of Stock subject to an Option shall be rounded down to the next nearest whole number. The period during which any Option shall be exercisable shall constitute the "Option Period" with respect to such Option.
10.2 TERM.
receive an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than ten percent of the outstanding Stock), an Option granted to such Grantee that is intended to be an Incentive Stock Option shall not be exercisable after the expiration of five years from its Grant Date.
10.3 ACCELERATION.
Any limitation on the exercise of an Option contained in any Award Agreement may be rescinded, modified or waived by the Board, in its sole discretion, at any time and from time to time after the Grant Date of such Option, so as to accelerate the time at which the Option may be exercised. Notwithstanding any other provision of the Plan, no Option shall be exercisable in whole or in part prior to the date the Plan is approved by the shareholders of the Company as provided in Section 5.1 hereof.
10.4 TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Upon the termination of a Grantee's employment or other relationship with the Company other than by reason of death or "permanent and total disability" (within the meaning of Section 22(e)(3) of the Code), any Option or portion thereof held by such Grantee that has not vested in accordance with the provisions of Section 10.1 hereof shall terminate immediately, and any Option or portion thereof that has vested in accordance with the provisions of Section 10.1 hereof but has not been exercised shall terminate at the close of business on the 90th day following the Grantee's termination of employment or other relationship(or, if such 90th day is a Saturday, Sunday or holiday, at the close of business on the next preceding day that is no a Saturday, Sunday or holiday), unless the Board, in its discretion, extends the period during which the Option may be exercised (which period may not be extended beyond the original term of the Option). Upon termination of an Option or portion thereof, the Grantee shall have no further right to purchase shares of Stock pursuant to such Option or portion thereof. Whether a leave of absence or leave on military or government service shall constitute a termination of employment or other relationship for purposes of the Plan shall be determined by the Board, which determination shall be final and conclusive. For purposes of the Plan, a termination of employment, service or other relationship shall not be deemed to occur if the Grantee is immediately thereafter employed with the Company or any other Service Provider, or is engaged as a Service Provider or an Outside director of the Company. Whether of termination of a Service Provider's or an Outside Director's relationship with the Company shall have occurred shall be determined by the Committee, which determination shall be final and conclusive.
10.5 RIGHTS IN THE EVENT OF DEATH.
If a Grantee dies while employed by or providing services to the Company, all Options granted to such Grantee shall fully vest on the date of death, and the executors or administrators or legatees or distributees of such Grantee's estate shall have the right, at any time within one year after the date of such Grantee's death (or such longer period as the Board, in its discretion, may determine prior to the expiration of such one-year period) and prior to termination of the Option pursuant to Section 10.2 above, to exercise any Option held by such Grantee at the date of such Grantee's death.
10.6 RIGHTS IN THE EVENT OF DISABILITY.
If a Grantee's employment or other relationship with the Company is terminated by reason of the "permanent and total disability" (within the meaning of Section 22(e)(3) of the Code) of such Grantee, such Grantee's Options shall continue to vest, and shall be exercisable to the extent that they are vested, for a period of one year after such termination of employment or service (or
such longer period as the Board, in its discretion, may determine prior to the expiration of such one-year period), subject to earlier termination of the Option as provided in Section 10.2 above. Whether a termination of employment or service is to be considered by reason of "permanent and total disability" for purposes of the Plan shall be determined by the Board, which determination shall be final and conclusive.
10.7 LIMITATIONS ON EXERCISE OF OPTION.
Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the shareholders of the Company as provided herein, or after ten years following the date upon which the Option is granted, or after the occurrence of an event referred to in Section 16 hereof which results in termination of the Option.
10.8 METHOD OF EXERCISE.
An Option that is exercisable may be exercised by the Grantee's delivery to the Company of written notice of exercise on any business day, at the Company's principal office, addressed to the attention of the Board. Such notice shall specify the number of shares of Stock with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares for which the Option is being exercised. The minimum number of shares of Stock with respect to which an Option may be exercised, in whole or in part, at any time shall be the lesser of (i) 100 shares or such lesser number set forth in the applicable Award Agreement and (ii) the maximum number of shares available for purchase under the Option at the time of exercise. Payment of the Option Price for the shares purchased pursuant to the exercise of an Option shall be made (i) in cash or in cash equivalents; (ii) through the tender to the Company of shares of Stock, which shares, if acquired from the Company, shall have been held for at least six months and which shall be valued, for purposes of determining the extent to which the Option Price has been paid thereby, at their Fair Market Value on the date of exercise; or (iii) by a combination of the methods described in (i) and (ii). The Board may provide, by inclusion of appropriate language in an Award Agreement, that payment in full of the Option Price need not accompany the written notice of exercise provided that the notice of exercise directs that the certificate or certificates for the shares of Stock for which the Option is exercised be delivered to a licensed broker acceptable to the Company as the agent for the individual exercising the Option and, at the time such certificate or certificates are delivered, the broker tenders to the Company cash (or cash equivalents acceptable to the Company) equal to the Option Price for the shares of Stock purchased pursuant to the exercise of the Option plus the amount (if any) of federal and/or other taxes which the Company may in its judgment, be required to withhold with respect to the exercise of the Option. An attempt to exercise any Option granted hereunder other than as set forth above shall be invalid and of no force and effect. Unless otherwise stated in the applicable Award Agreement, an individual holding or exercising an Option shall have none of the rights of a shareholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock) until the shares of Stock covered thereby are fully paid and issued to such individual. Except as provided in Section 16 hereof, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.
10.9 DELIVERY OF STOCK CERTIFICATES.
Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates evidencing his or her ownership of the shares of Stock subject to the Option.
11. TRANSFERABILITY OF OPTIONS
11.1 GENERAL RULE
Except as provided in Section 11.2, during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's guardian or legal representative) may exercise an Option. Except as provided in Section 11.2, no Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
11.2 FAMILY TRANSFERS.
If authorized in the applicable Award Agreement, a Grantee may transfer all or part of an Option that is not an Incentive Stock Option to (i) any Immediate Family Member, (ii) a trust or trusts for the exclusive benefit of any Immediate Family Member, or (iii) a partnership in which Immediate Family Members are the only partners, provided that (x) there may be no consideration for any such transfer, and (y) subsequent transfers of transferred Options are prohibited except those in accordance with this Section 11.2 or by will or the laws of descent and distribution. Following transfer, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Section 11.2 hereof the term "Grantee" shall be deemed to refer the transferee. The events of termination of the employment or other relationship of Section 10.4 hereof shall continue to be applied with respect to the original Grantee, following which the Option shall be exercisable by the transferee only to the extent, and for the periods specified in Sections 10.4, 10.5 or 10.6.
12. RESTRICTED STOCK
12.1 GRANT OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS.
The Board may from time to time grant Restricted Stock or Restricted Stock Units to persons eligible to receive Grants under Section 6 hereof, subject to such restrictions, conditions and other terms as the Board may determine.
12.2 RESTRICTIONS.
At the time a Grant of Restricted Stock or Restricted Stock Units is
made, the Board shall establish a period of time (the "Restricted Period")
applicable to such Restricted Stock or Restricted Stock Units. Each Grant of
Restricted Stock or Restricted Stock Units may be subject to a different
Restricted Period. The Board may, in its sole discretion, at the time a Grant
of Restricted Stock or Restricted Stock Units is made, prescribe restrictions
in addition to or other than the expiration of the Restricted Period, including
the satisfaction of corporate or individual performance objectives, which may
be applicable to all or any portion of the Restricted Stock or Restricted Stock
Units. Such performance objectives shall be established in writing by the Board
prior to the ninetieth day of the year in which the Grant is made and while the
outcome is substantially uncertain. Performance objectives shall be based on
Stock price, market share, sales, earnings per share, return on equity or
costs. Performance objectives may include positive results, maintaining the
status quo or limiting economic losses. Subject to the second sentence of this
Section 12.2, the Board also may, in its sole discretion, shorten or terminate
the Restricted Period or waive any other restrictions applicable to all or a
portion of the Restricted Stock or Restricted Stock Units. Neither Restricted
Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the Restricted Period or prior to
the satisfaction of any other restrictions prescribed by the Board with respect to such Restricted Stock or Restricted Stock Units.
12.3 RESTRICTED STOCK CERTIFICATES.
The Company shall issue, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates representing the total number of shares of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Secretary of the Company shall hold such certificates for the Grantee's benefit until such time as the Restricted Stock is forfeited to the Company, or the restrictions lapse.
12.4 RIGHTS OF HOLDERS OF RESTRICTED STOCK.
Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such Stock and the right to receive any dividends declared or paid with respect to such Stock. The Board may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions applicable to such Restricted Stock. All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Grant.
12.5 RIGHTS OF HOLDERS OF RESTRICTED STOCK UNITS.
Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock Units shall have no rights as stockholders of the Company. The Board may provide in an Award Agreement evidencing a Grant of Restricted Stock Units that the holder of such Restricted Stock Units shall be entitled to receive, upon the Company's payment of a cash dividend on its outstanding Stock, a cash payment for each Restricted Stock Unit held equal to the per-share dividend paid on the Stock. Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Restricted Stock Units at a price per unit equal to the Fair Market Value of a share of Stock on the date that such dividend is paid.
12.6 TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Upon the termination of the employment of a Grantee with the Company or a Service Provider or of a Service Provider's relationship with the Company, in either case other than, in the case of individuals, by reason of death or "permanent and total disability" (within the meaning of Section 22(e)(3) of the Code), any shares of Restricted Stock or Restricted Stock Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited, unless the Board, in its discretion, determines otherwise. Upon forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have no further rights with respect to such Grant, including but not limited to any right to vote Restricted Stock or any right to receive dividends with respect to shares of Restricted Stock or Restricted Stock Units. Whether a leave of absence or leave on military or government service shall constitute a termination of employment or other relationship for purposes of the Plan shall be determined by the Board, which determination shall be final and conclusive. For purposes of the Plan, a termination of employment, service or other relationship shall not be deemed to occur if the Grantee is immediately thereafter employed with the Company or any other Service Provider, or is engaged as a Service Provider or an Outside Director of the Company. Whether a termination of a Service Provider's or an Outside Director's relationship with the Company shall have occurred shall be determined by the Committee, which determination shall be final and conclusive.
12.7 RIGHTS IN THE EVENT OF DEATH.
If a Grantee dies while employed by the Company or a Service Provider, or while serving as a Service Provider, all Restricted Stock or Restricted Stock Units granted to such Grantee shall fully vest on the date of death, and the shares of Stock represented thereby shall be deliverable in accordance with the terms of the Plan to the executors, administrators, legatees or distributees of the Grantee's estate.
12.8 RIGHTS IN THE EVENT OF DISABILITY.
If a Grantee's employment or other relationship with the Company or a Service Provider, or while serving as a Service Provider, is terminated by reason of the "permanent and total disability" (within the meaning of Section 22(e)(3) of the Code) of such Grantee, such Grantee's Restricted Stock or Restricted Stock Units shall continue to vest in accordance with the applicable Award Agreement for a period of one year after such termination of employment or service (or such longer period as the Board, in its discretion, may determine prior to the expiration of such one-year period), subject to the earlier forfeiture of such Restricted Stock or Restricted Stock Units in accordance with the terms of the applicable Award Agreement. Whether a termination of employment or service is to be considered by reason of "permanent and total disability" for purposes of the Plan shall be determined by the Board, which determination shall be final and conclusive.
12.9 DELIVERY OF STOCK AND PAYMENT THEREFOR.
Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or Restricted Stock Units shall lapse, and, upon payment by the Grantee to the Company, in cash or by check, of the aggregate par value of the shares of Stock represented by such Restricted Stock or Restricted Stock Units, a stock certificate for such shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee's beneficiary or estate, as the case may be.
13. PARACHUTE LIMITATIONS
such right to exercise, vesting, payment, or benefit under this Plan, in conjunction with all other rights, payments, or benefits to or for the Grantee under any Other Agreement or any Benefit Arrangement would cause the Grantee to be considered to have received a Parachute Payment under this Plan that would have the effect of decreasing the after-tax amount received by the Grantee as described in clause (ii) of the preceding sentence, then the Grantee shall have the right, in the Grantee's sole discretion, to designate those rights, payments, or benefits under this Plan, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Grantee under this Plan be deemed to be a Parachute Payment.
14. REQUIREMENTS OF LAW
14.1 GENERAL.
The Company shall not be required to sell or issue any shares of Stock under any Grant if the sale or issuance of such shares would constitute a violation by the Grantee, any other individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to a Grant upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual exercising an Option pursuant to such Grant unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Grant. Specifically, in connection with the Securities Act, upon the exercise of any Option or the delivery of any shares of Restricted Stock or Stock underlying Restricted Stock Units, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Grant, the Company shall not be required to sell or issue such shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Board shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option shall not be exercisable until the shares of Stock covered by such Option are registered or are exempt from registration, the exercise of such Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.
14.3 RULE 16B-3.
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Grants pursuant to the Plan and the exercise of Options granted hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Board does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan.
In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.
15. AMENDMENT AND TERMINATION OF THE PLAN
16. EFFECT OF CHANGES IN CAPITALIZATION
16.1 CHANGES IN STOCK.
If the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares for which Grants of Options, Restricted Stock and Restricted Stock Units may be made under the Plan shall be adjusted proportionately and accordingly by the Company. In addition, the number and kind of shares for which Grants are outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding Options shall not change the aggregate Option Price payable with respect to shares that are subject to the unexercised portion of an Option outstanding but shall include a corresponding proportionate adjustment in the Option Price per share. The conversion of any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration.
16.2 REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING ENTITY AND IN WHICH NO CHANGE OF CONTROL OCCURS.
Subject to Section 16.3 hereof, if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities in which no Change in Control occurs, any Option theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to such Option would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Option Price per share so that the aggregate Option Price thereafter shall be the same as the aggregate Option Price of the shares remaining subject to the Option immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement evidencing a Grant of Restricted Stock,
any restrictions applicable to such Restricted Stock shall apply as well to any replacement shares received by the Grantee as a result of the reorganization, merger or consolidation.
16.3 REORGANIZATION, SALE OF ASSETS OR SALE OF STOCK WHICH INVOLVES A CHANGE OF CONTROL
Subject to the exceptions set forth in the last sentence of this
Section 16.3, (i) upon the occurrence of a Change of Control, all outstanding
shares of Restricted Stock and Restricted Stock Units shall be deemed to have
vested, and all restrictions and conditions applicable to such shares of
Restricted Stock and Restricted Stock Units shall be deemed to have lapsed,
immediately prior to the occurrence of such Change of Control, and (ii) fifteen
days prior to the scheduled consummation of the Change of Control, all Options
outstanding hereunder shall become immediately exercisable and shall remain
exercisable for a period of fifteen days. Any exercise of an Option during such
fifteen-day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event. Upon
consummation of any Change of Control, the Plan and all outstanding but
unexercised Options shall terminate. The Board shall send written notice of an
event that will result in such a termination to all individuals who hold
Options not later than the time at which the Company gives notice thereof to
its shareholders. This Section 16.3 shall not apply to any Change of Control to
the extent that (A) provision is made in writing in connection with such Change
of Control for the continuation of the Plan or the assumption of the Options,
Restricted Stock and Restricted Stock Units theretofore granted, or for the
substitution for such Options, Restricted Stock and Restricted Stock Units of
new options, restricted stock and restricted stock units covering the stock of
a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
in which event the Plan and Options, Restricted Stock and Restricted Stock
Units theretofore granted shall continue in the manner and under the terms so
provided or (B) a majority of the full Board determines that such Change of
Control shall not trigger application of the provisions of this Section 16.3
subject to Section 24
16.4 ADJUSTMENTS.
Adjustments under this Section 16 related to shares of Stock or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share.
16.5 NO LIMITATIONS ON COMPANY.
The making of Grants pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any affiliate, or to interfere in any way with any contractual or other right or authority of the Company or a Service Provider either to increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Company. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, no Grant awarded under the Plan shall be
affected by any change of duties or position of the Optionee, so long as such Grantee continues to be a director, officer, consultant or employee of the Company. The obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any participant or beneficiary under the terms of the Plan. No Grantee shall have any of the rights of a shareholder with respect to the shares of Stock subject to an Option except to the extent the certificates for such shares of Stock shall have been issued upon the exercise of the Option.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable, including, without limitation, the granting of stock options otherwise than under the Plan.
19. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right
to deduct from payments of any kind otherwise due to a Grantee any Federal,
state, or local taxes of any kind required by law to be withheld with respect
to the vesting of or other lapse of restrictions applicable to Restricted Stock
or Restricted Stock Units or upon the issuance of any shares of Stock upon the
exercise of an Option. At the time of such vesting, lapse, or exercise, the
Grantee shall pay to the Company or the Subsidiary, as the case may be, any
amount that the Company or the Subsidiary may reasonably determine to be
necessary to satisfy such withholding obligation. Subject to the prior approval
of the Company or the Subsidiary, which may be withheld by the Company or the
Subsidiary, as the case may be, in its sole discretion, the Grantee may elect
to satisfy such obligations, in whole or in part, (i) by causing the Company or
the Subsidiary to withhold shares of Stock otherwise issuable to the Grantee or
(ii) by delivering to the Company or the Subsidiary shares of Stock already
owned by the Grantee. The shares of Stock so delivered or withheld shall have
an aggregate Fair Market Value equal to such withholding obligations. The Fair
Market Value of the shares of Stock used to satisfy such withholding obligation
shall be determined by the Company or the Subsidiary as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this Section 19 may satisfy his or her withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
20. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement.
21. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion.
22. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.
23. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
24. POOLING
Notwithstanding anything in the Plan to the contrary, if any right under or feature of the Plan would cause to be ineligible for pooling of interest accounting a transaction that would, but for the right or feature hereunder, be eligible for such accounting treatment, the Board may modify or adjust the right or feature so that the transaction will be eligible for pooling of interest accounting. Such modification or adjustment may include payment of cash or issuance to a Grantee of Stock having a Fair Market Value equal to the cash value of such right or feature.
25. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing the Grants awarded hereunder shall be governed by the laws of the State of Florida.
Exhibit 10.10
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into this 26th day of December, 2001, and is effective as of the 1st day of January, 1999 (the "Effective Date"), by and between Answerthink, Inc., a Florida corporation (the "Company"), and David N. Dungan (the "Executive").
WHEREAS, the Company and the Executive have entered into a Senior Management Agreement dated as of July 11, 1997, as amended (the "Senior Management Agreement");
WHEREAS, the Company and the Executive desire to amend the Senior Management Agreement to delete the "Provisions Relating to Employment" therein and the Company desires to employ the Executive, and the Executive desires to be employed by the Company, on the terms and conditions set forth herein from and after the Effective Date; and
WHEREAS, the board of directors of the Company (the "Board") has approved and authorized the entry into this Agreement with the Executive.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:
(a) Base Salary. During the Employment Period, the Company shall pay to the Executive an annual base salary (the "Base Salary"), which initially shall be at the rate of $500,000.00 per year. The Base Salary shall be reviewed no less frequently than annually and may be increased at the discretion of the Board. If the Executive's Base Salary is increased, the increased amount shall be the Base Salary for the remainder of the Employment Period. Except as otherwise agreed in writing by the Executive, the Base Salary shall not be reduced from the amount previously in effect during the Employment Period. The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company's payroll procedures.
(b) Bonus. During the Employment Period, the Executive may also be eligible to earn an annual bonus pursuant to a bonus plan adopted by the Board for each fiscal year.
(c) Benefits. During the Employment Period, the Executive will be entitled to such other benefits approved by the Board and made available to employees. Nothing contained in this Agreement shall prevent the Company from changing carriers or from effecting modifications in insurance coverage for the Executive.
(d) Vacation; Holidays. The Executive shall be entitled to all public holidays observed by the Company and vacation days in accordance with the applicable
vacation policies for senior executives of the Company, which shall be taken at a reasonable time or times.
(e) Withholding Taxes and Other Deductions. To the extent required by law, the Company shall withhold from any payments due Executive under this Agreement any applicable federal, state or local taxes and such other deductions as are prescribed by law or Company policy.
(a) Information. The Executive acknowledges that the information, observations and data obtained by the Executive concerning the business and affairs of the Company and its Subsidiaries and their predecessors during the course of the Executive'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 Subsidiaries, including information concerning acquisition opportunities in or reasonably related to the business or industry of the Company or its Subsidiaries of which the Executive becomes aware during such period. Therefore, the 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 the Executive'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 the Executive's acts or omissions to act or the acts or omissions to act of other senior or junior management employees of the Company and its Subsidiaries. The Executive agrees to deliver to the Company at the termination of the Executive'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 Subsidiaries and their predecessors (including, without limitation, all acquisition prospects, lists and contact information) which the Executive may then possess or have under the Executive's control.
(b) Inventions and Patents. The 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 actual or anticipated business, research and development or existing or future products or services of the Company or its Subsidiaries that are conceived, developed, made or reduced to practice by the Executive while employed by the Company or any of its predecessors ("Work
Product") belong to the Company and the Executive hereby assigns, and agrees to assign, all of the above to the Company. Any copyrightable work prepared in whole or in part by the Executive in the course of the Executive'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," the Executive hereby assigns and agrees to assign to Company all right, title and interest, including without limitation, copyright in and to such copyrightable work. The 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 ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).
(c) Enforcement. The Executive acknowledges that the restrictions contained in Section 7(a) hereof are reasonable and necessary, in view of the nature of the Company's business, in order to protect the legitimate interests of the Company, and that any violation thereof would result in irreparable injury to the Company. Therefore, the Executive agrees that in the event of a breach or threatened breach by the Executive of the provisions of Section 7(a) hereof, the Company shall be entitled to obtain from any court of competent jurisdiction, preliminary or permanent injunctive relief restraining the Executive from disclosing or using any such confidential information. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including, without limitation, recovery of damages from the Executive.
(a) Permitted Terminations. The Executive's employment hereunder may be terminated during the Employment Period without any breach of this Agreement only under the following circumstances:
(i) Death. The Executive's employment hereunder shall terminate upon the Executive's death;
(ii) By the Company. The Company may terminate the Executive's employment:
(A) If the Executive shall have been unable to perform all of the Executive's duties hereunder by reason of illness, physical or mental disability or other similar incapacity, which inability shall continue for more than three consecutive months; or
(B) For Cause; or
(iii) By the Executive. The Executive may terminate employment for Good Reason.
(b) Termination. Any termination of the Executive's employment by the Company or the Executive (other than because of the Executive's death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon, if any, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Termination of the Executive's employment shall take effect on the Date of Termination.
(a) Death. If the Executive's employment is terminated during the Employment Period as a result of the Executive's death, the Company shall pay to the Executive's estate, or as may be directed by the legal representatives of such estate, the Executive's full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any bonus or incentive compensation plan or program of the Company pursuant to Sections 5(b) and (c) hereof, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement.
(b) Disability. If the Company terminates the Executive's employment during the Employment Period because of the Executive's disability pursuant to Section 8(a)(ii)(A) hereof, the Company shall pay the Executive the Executive's full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which the Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any bonus or incentive compensation plan of program of the Company pursuant to Sections 5(b) and (c) hereof, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement; provided, that payments so made to the Executive during any period that the Executive is unable to perform all of the Executive's duties hereunder by reason of illness, physical or mental illness or other similar incapacity shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any such payment under disability benefit plans of the Company and which amounts were not previously applied to reduce any such payment.
(c) By the Company with Cause or by the Executive without Good Reason. If the Company terminates the Executive's employment during the Employment Period for Cause pursuant to Section 8(a)(ii)(B) hereof or if the Executive voluntarily terminates the Executive's employment during the Employment Period other than for Good Reason, the Company shall pay the Executive the Executive's full Base Salary through the Date of Termination and all other unpaid amounts, if any, to which Executive is entitled as of the Date of Termination in connection with any fringe benefits or under any bonus or incentive compensation plan or program of the Company pursuant to Sections 5(b) and (c)
hereof, at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement.
(d) By the Company without Cause or by the Executive for Good Reason.
If the Company terminates the Executive's employment during the
Employment Period other than for Cause, disability or death pursuant to
Section 8(a)(i) or (ii) hereof, or the Executive terminates his
employment during the Employment Period for Good Reason pursuant to
Section 8(a)(iii) hereof, the Company shall pay the Executive (A) the
Executive's full Base Salary through the Date of Termination and all
other unpaid amounts, if any, to which the Executive is entitled as of
the Date of Termination in connection with any fringe benefits or under
any bonus or incentive compensation plan or program of the Company
pursuant to Sections 5(b) and (c) hereof, at the time such payments are
due and (B) subject to Sections 9(e) and 9(f) hereof:
(i) No Change of Control. Except as provided in Section
9(d)(ii) hereof, during the one-year period commencing on the
Date of Termination (the "Initial Period"), the Company shall
pay the Executive an aggregate amount equal to Executive's
Base Salary, payable in equal installments on the Company's
regular salary payment dates, and any other amounts that would
have been payable to or on behalf of the Executive under
Section 5(c) hereof (the "Severance Payments"). In addition,
the Company shall have the option, by delivering written
notice to the Executive in accordance with Section 11 hereof
within 90 days after the Date of Termination, to extend the
severance period 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 the same annual rate to the Executive. Notwithstanding the
foregoing and without in any way modifying the provisions of
Sections 7 and 10 hereof, from and after the first date that
Executive becomes employed with another Person or provides
services as a consultant or other self-employed individual,
the Company, at its option, may eliminate or otherwise reduce
the amount of Severance Payments otherwise required to be made
pursuant to this Section 9(d)(i) to the extent of the
compensation and benefits received by the Executive from such
other employment or self-employment; or
(ii) Change of Control. If such termination is in anticipation of, in connection with or within one year after the date of a Change of Control, the Company shall pay the Executive an aggregate amount equal to Executive's Base Salary, payable in equal installments on the Company's regular salary payment dates, and any other amounts that would have been payable to or on behalf of the Executive under Section 5(c) hereof (the "Severance Payments") from the Date of Termination through the second anniversary of the Date of Termination at the time such payments would otherwise have been due in accordance with the Company's normal payroll practices, and the Company shall have no further obligations to the Executive under this Agreement. In addition, in such event, the
Executive's rights with respect to stock options and shares of restricted stock previously granted by the Company, deferred and incentive compensation or bonus amounts awarded by the Company and other contingent or deferred compensation awards or grants made by the Company, or otherwise made in connection with the Executive's employment hereunder, shall be fully vested and nonforfeitable as of the Date of Termination, except to the extent inconsistent with the terms of any such plan or arrangement that is intended to qualify under Section 401(a) or 423 of the Code. For purposes of Section 10 hereof, the "Initial Period" shall be the first 24 months following the Date of Termination.
(e) Parachute Limitations. Notwithstanding any other provision of this
Agreement or of any other agreement, contract or understanding
heretofore or hereafter entered into by the Executive with the Company
or any subsidiary or affiliate thereof, except an agreement, contract
or understanding hereafter entered into that expressly modifies or
excludes application of this Section 9(e) (the "Other Agreements"), and
notwithstanding any formal or informal plan or other arrangement
heretofore or hereafter adopted by the Company (or any subsidiary or
affiliate thereof) for the direct or indirect compensation of the
Executive (including groups or classes of participants or beneficiaries
of which the Executive is a member), whether or not such compensation
is deferred, is in cash, or is in the form of a benefit to or for the
Executive (a "Benefit Plan"), if the Executive is a "disqualified
individual" (as defined in Section 280G(c) of the Internal Revenue Code
of 1986, as amended (the "Code")), the Executive shall not have any
right to receive any payment or benefit under this Agreement, any Other
Agreement or any Benefit Plan (i) to the extent that such payment or
benefit, taking into account all other rights, payments or benefits to
or for the Executive under this Agreement, all Other Agreements and all
Benefit Plans, would cause any payment or benefit to the Executive
under this Agreement, any Other Agreement or any Benefit Plan to be
considered a "parachute payment" within the meaning of Section
280G(b)(2) of the Code as then in effect (a "Parachute Payment") and
(ii) if, as a result of receiving a Parachute Payment, the aggregate
after-tax amount received by the Executive under this Agreement, all
Other Agreements and all Benefit Plans would be less than the maximum
after-tax amount that could be received by the Executive without
causing any such payment or benefit to be considered a Parachute
Payment. In the event that the receipt of any such payment or benefit
under this Agreement, any Other Agreement or any Benefit Plan would
cause the Executive to be considered to have received a Parachute
Payment that would have the adverse after-tax effect described in
clause (ii) of the preceding sentence, then the Executive shall have
the right, in the Executive's sole discretion, to designate those
rights, payments or benefits under this Agreement, any Other Agreement
and any Benefit Plan that should be reduced or eliminated so as to
avoid having the payment or benefit to the Executive under this
Agreement be deemed to be a Parachute Payment.
(f) Mitigation. The Company's obligation to continue to provide the Executive with benefits pursuant to Section 9(d)(i) or (ii) above shall cease if the Executive
becomes eligible to participate in benefits substantially similar to those provided under this Agreement as a result of the Executive's subsequent employment during the period that the Executive is entitled to receive Severance Payments.
(g) Liquidated Damages. The parties acknowledge and agree that damages which will result to the Executive for termination by the Company without Cause or by the Executive for Good Reason shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination. The Executive agrees that, except for such other payments and benefits to which the Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that the Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, the Executive will execute a release of claims in a form reasonably satisfactory to the Company.
(a) Noncompetition. The Executive acknowledges that in the course of his employment with the Company and its Subsidiaries and their predecessors, he has and will continue to become familiar with the trade secrets of, and other confidential information concerning, the Company and its Subsidiaries, that the 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 the Executive. Therefore, and in further consideration of the compensation being paid to the Executive hereunder, the Executive agrees that, during the Employment Period and any Initial Period or Extended Period, so long as Severance Payments are being made or during any portion of the Initial or Extended Period that Severance Payments are not required to be made pursuant to the last sentence of Section 9(d)(i) hereof (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 Employment Period and for two years following the Date of Termination, the 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 the 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 prior to the Date of Termination.
(c) Enforcement. If, at the time of enforcement of this Section 10, 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 the Executive's services are unique and because the Executive 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 Agreement. Therefore, in the event a breach or threatened breach by the Executive of any provision of this 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).
(a) If to the Company: Ted Fernandez, Chief Executive Officer,
Answerthink, Inc. 1001 Brickell Bay Drive, Suite 3000, Miami, FL 33131.
Copy to: Corporate Counsel.
(b) If to the Executive:______________________________________________.
or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.
"Agreement" means this Employment Agreement.
"Base Salary" is defined in Section 5(a) above.
"Beneficial Owner" means a beneficial owner within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
"Benefit Plan" is defined in Section 9(e) above.
"Board" means the board of directors of the Company.
"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 the Executive as reasonably directed by the Board, and such failure is not cured within 30 days after the 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 7 or 10 of this Agreement.
"Change in Control" means (A) any Person, other than any Person who is a Beneficial Owner of the Company's securities before the Offering Date, becomes, after the Offering Date, the beneficial owner, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities; (B) during any two-year period, individuals who at the beginning of such period constitute the Board (including, for this purpose, any director who after the beginning of such period filled a vacancy on the Board caused by the resignation, mandatory retirement, death, or disability of a director and whose election or appointment was approved by a vote of at least two-thirds of the directors then in office who were directors at the beginning of such period) cease for any reason to constitute a majority thereof; (C) notwithstanding clauses (A) or (E) of this paragraph, the Company consummates a merger or consolidation of the Company with or into another corporation, the result of which is that the Persons who were stockholders of the Company at the time of the execution of the agreement to merge or consolidate own less than 80% of the total equity of the corporation surviving or resulting from the merger or consolidation or of a corporation owning, directly or indirectly, 100% of the total equity of such surviving or resulting corporation; or (D) the sale in one or a series of transactions of all or substantially all of the assets of the Company; (E) any Person has commenced a tender or exchange offer, or
entered into an agreement or received an option to acquire beneficial ownership of 40% or more of the total number of voting shares of the Company, unless the Board has made a determination that such action does not constitute and will not constitute a material change in the Persons having control of the Company; or (F) there is a change of control in the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act other than in circumstances specifically covered by clauses (A) through (E) above.
"Code" is defined in Section 9(e) above.
"Company" means Answerthink, Inc. and its successors and assigns.
"Date of Termination" means (i) if the Executive's employment is
terminated by the Executive's death, the date of the Executive's death;
(ii) if the Executive's employment is terminated because of the
Executive's disability pursuant to Section 8(a)(ii)(A) hereof, 30 days
after Notice of Termination, provided that the Executive shall not have
returned to the performance of the Executive's duties on a full-time
basis during such 30-day period; (iii) if the Executive's employment is
terminated by the Company for Cause pursuant to Section 8(a)(ii)(B)
hereof or by the Executive for Good Reason pursuant to Section
8(a)(iii) hereof, the date specified in the Notice of Termination; or
(iv) if the Executive's employment is terminated during the Employment
Period other than pursuant to Section 8(a), the date on which Notice of
Termination is given.
"Employment Period" is defined in Section 2 above.
"Executive" means David N. Dungan.
"Extended Period" is defined in Section 9(d)(i) above.
"Extended Term" is defined in Section 2 above.
"Good Reason" means (i) the Company's failure to perform or observe any of the material terms or provisions of this Agreement, and the continued failure of the Company to cure such default within 30 days after written demand for performance has been given to the Company by the Executive, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; or (ii) a material reduction in the scope of the Executive's responsibilities and duties.
"Initial Period" is defined in Section 9(d) above.
"Initial Term" is defined in Section 2 above.
"Noncompete Period" is defined in Section 10(a) above.
"Notice of Termination" is defined in Section 8(b) above.
"Offering Date" means the date of the completion of an initial public offering of the Company's Common Stock.
"Other Agreements" is defined in Section 9(e) above.
"Parachute Payment" is defined in Section 9(e) above.
"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 governmental entity or any department, agency or political subdivision thereof.
"Senior Management Agreement" means the Senior Management Agreement dated as of July 11, 1997, as amended, by and between the Company and the Executive.
"Severance Payments" is defined in Section 9(d) above.
"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.
"Work Product" is defined in Section 7(b) above.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year first hereinabove written.
ANSWERTHINK, INC.
By: /s/ Ted A. Fernandez Name: Ted A. Fernandez Title: Chief Executive Officer |
THE EXECUTIVE:
/s/ David N. Dungan ------------------------------ David N. Dungan |
Exhibit 10.12
As of May 18, 2001
Mr. Ulysses S. Knotts, III
470 Montwicke Chase
Atlanta, GA 30327
Dear Uly:
This letter shall constitute a separation agreement (this "Agreement"), by and between Answerthink, Inc., a Florida corporation ("Answerthink"), and you with respect to the termination of your employment with Answerthink and the other matters set forth herein. In consideration of the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Answerthink and you (sometimes hereafter referred to collectively as the "Parties") hereby agree as follows:
1. Termination Without Cause.
(a) Effective at the close of business on September May 18, 2001 (the "Effective Date"), your employment with Answerthink shall be deemed to have been terminated without cause, and you agree that you will have no right to nor will you have any expectation of further employment with Answerthink or any of its affiliates after the Effective Date. You represent and warrant that after the Effective Date you will not take any action to legally bind or obligate Answerthink.
(b) You further agree that once all of the payments referred to in Section 2 of this Agreement have been made you shall have been paid all amounts in the nature compensation of any kind due and owing to you, whether pursuant to that certain Senior Management Agreement dated as of April 23, 1997 by and between you and Answerthink (the "Senior Management Agreement"), or that certain Employment Agreement dated as of June 2, 1998 by and between you and Answerthink (the "Employment Agreement") which amended and restated the employment related provisions of the Senior Management Agreement, or otherwise, including all wages, salary, commissions, bonuses, incentive payments, profit sharing payments, expense reimbursements, leave, severance pay, stock options or other securities or other benefits, in respect of your employment services for and on behalf of Answerthink. You further agree that the payments
referred to in Section 2 of this Agreement, in addition to compensating you fully for all services rendered by you to Answerthink and its affiliates to date, include consideration for your promises contained in this Agreement.
(c) Following the Effective Date, Answerthink will cooperate with you regarding COBRA and your 401-K account so that you will be able to avail yourself of the full benefits to which you are entitled under applicable law.
2. Payment.
(a) Answerthink agrees that on or before the next scheduled payroll payment date following the Effective Date it will pay you (less appropriate income and employment tax withholdings), to the extent not previously paid to you, any unpaid salary for your employment services by and on behalf of Answerthink through the Effective Date. In addition, Answerthink shall reimburse you for any business expenses incurred by you during your employment with Answerthink that has not yet been reimbursed to you.
(b) Answerthink agrees that, unless you have violated the terms of this Agreement or the Employment Agreement, Answerthink will pay you THREE HUNDRED SEVEN THOUSAND SIX HUNDRED NINETY TWO AND 32/100 DOLLARS ($307,692.32USD) (less appropriate income and employment tax withholding) in sixteen semi-monthly installments in the amount of NINETEEN THOUSAND TWO HUNDRED THIRTY AND 77/100 DOLLARS ($19,230.77USD) (less appropriate income and employment tax withholding) in accordance with the regular Answerthink payroll cycle. Subject to the terms of this Agreement, Answerthink will commence payment of such installments on the first Answerthink regular payroll date following the Effective Date. In the event of your death prior to the final installment of such payments, any remaining payments will be made to your estate. You hereby agree to waive any right that you may have to any additional severance payments contained in Section 9 of the Employment Agreement or otherwise.
3. Non-Disclosure of This Agreement. Each of the Parties hereto, for the
benefit of the other Party hereto, hereby agrees that from and after
the date of such Party's execution and delivery of this Agreement, each
such Party will not, directly or indirectly, provide to any person or
entity any information that concerns or relates to the negotiation of
or circumstances leading to the execution of this Agreement or to the
terms and conditions hereof, except to (i) the extent that such
disclosure is specifically required by applicable law or legal process;
(ii) such Party's tax advisors as may be necessary for the preparation
of tax returns or other similar reports required by law, (iii) such
Party's attorneys as may be necessary to secure advice concerning the
interpretation of this Agreement or to this Agreement in connection
with the enforcement of; or (iv) members of your immediate family. Each
Party agrees that prior to disclosing such information under parts
(ii), (iii) or (iv) of this Section 3, such Party will inform the
recipients that they are bound by the
limitations of this Section 3 and such disclosure will only be permitted if the recipient agrees to be bound by such limitations. Each Party further agrees that any disclosure of such information by any such recipients not in accordance with this Section 3 shall be deemed to be a disclosure by the disclosing Party in breach of this Agreement. Answerthink agrees not to provide to any third party (which term, for purposes hereof, shall not include Answerthink and its affiliates and their respective officers, directors, employees, securityholders and professional advisors) the terms of this Agreement or any information that concerns or relates to the negotiation of or circumstances leading to the execution of this Agreement unless Answerthink determines in good faith that it is specifically required to do so by applicable law or legal process.
4. Confidential Information; Noncompetition and Nonsolicitation. You agree that Sections 7 and 10 of the Employment Agreement relating to confidential information, noncompetition and nonsolicitation continue in full force and effect in accordance with the terms thereof and are not modified by the terms of this Agreement.
5. Return of Information. You further agree to cooperate fully with Answerthink in returning to Answerthink the originals and all copies of all files, materials, documents or other property relating to the business and affairs of Answerthink and its affiliates. You may retain only personal correspondence relating to the duties and responsibilities of your employment.
6. No Adverse Comment. You agree to coordinate with Answerthink's Chief Executive Officer any requests for employment references from Answerthink which in all cases will be limited to employment dates and titles held. Each Party hereto agrees that such Party will not make any disparaging statements, whether written, oral or electronically transmitted regarding the other Party and its affiliates and in the case of Answerthink its business and affairs, employees, agents, officers, directors and securityholders.
7. Breach or Violation. Each party agrees that in the event of a violation of the provisions of this Agreement by such Party, in addition to any damages allowed by law, the other Party hereto shall be entitled to injunctive relief. In the event of a judicial determination that any restriction contained in this Agreement is unreasonable, you and Answerthink agree that the court may modify such restriction to make it reasonable or eliminate such restriction prior to granting any injunctive relief.
8. Certain Additional Representations. Each of the Parties represents and warrants to the other Party that in executing this Agreement such party does not rely and has not relied upon any representation or statement made by the other Party or the Party's agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise.
9. Other Agreements.
(a) Reference is made to that certain Restricted Securities Agreement dated as of April 23, 1997, among you, Golder, Thoma, Cressey, Rauner Fund V, L.P., a Delaware Limited Partnership ("GTCR V"), Gator Associates, Ltd., A Florida
limited partnership, MG Capital Partners II, L.P., a Delaware limited partnership, and Tara Ventures, Ltd., a British Virgin Islands corporation (the "Restricted Securities Agreement"). Answerthink hereby acknowledges and confirms that all shares of Answerthink common stock covered by the Restricted Securities Agreement and all shares of Answerthink common stock covered by sections 1 through 6 of the Senior Management Agreement are fully vested.
(b) You further agree and acknowledge that, other than those grants noted below, no stock options have been granted to you as of the Effective Date, and that you claim no right to any option to purchase Answerthink stock, common or preferred, from Answerthink.
Grant Date Number of Options
---------- -----------------
March 31, 1999 5,000
January 31, 2000 10,000
Remainder of page intentionally left blank.
|
10. Releases.
(a) In consideration of the consideration paid to you hereunder, you hereby release Answerthink, its predecessors, successors present and former affiliates, subsidiaries, parents, related entities, officers, directors, members, managers, assigns, insurers, representatives, employees, agents, attorneys, and each of them, from any and all claims, demands, charges, complaints, liabilities, obligations, indemnities, promises, agreements, contracts, covenants, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, liens, debts and expenses, of whatever kind or nature in law, equity or otherwise, which you now possess, have possessed, or may in the future possess, against any of them, or to which you are or claim to be entitled, whether known or unknown, suspected or unsuspected, committed or omitted prior to the date of this Agreement arising from, or relating to, your employment with Answerthink, the termination of your employment with Answerthink, the Restricted Securities Agreement, the Employment Agreement and any matters related thereto or any other transactions, occurrences, acts or omissions or any loss, damages or injury whatsoever, known or unknown, suspected or unsuspected, resulting from any act or omission by or on the part of any of the releasees ("Knotts Released Claims"). The Knotts Released Claims include, but are not limited to, any action arising out of any foreign, federal, state or local constitution, statute, ordinance, regulation, or common law, including, but not limited to, those arising under the Age Discrimination In Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as amended, The Equal Pay Act, The Americans With Disabilities Act, The Family and Medical Leave Act, The Employee Retirement Income Security Act, the Worker Adjustment and Retraining Notification Act, and the provisions of any other laws regulating wages, hours and working conditions, any other foreign, federal, state or local laws prohibiting employment discrimination or otherwise regulating employment, any claim or claims for discrimination, failure to prevent discrimination, retaliation, failure to prevent retaliation, harassment, failure to prevent harassment, assault, battery, misrepresentation, fraud, deceit, invasion of privacy, breach of contract, breach of collective bargaining agreement, breach of quasi-contract, breach of implied contract, an accounting, wrongful or constructive discharge, breach of the covenant of good faith and fair dealing, libel, slander, negligent or intentional infliction of emotional distress, violation of public policy, negligent supervision, negligent retention, negligence, interference with business opportunity or with contracts, and any claim or claims for severance pay, bonus or similar benefit, sick leave, pension, retirement, retirement bonus, holiday pay, life insurance, health or medical insurance, reimbursement of health or medical costs, worker's compensation or disability. However, this release does not cover any obligations by Answerthink to make payments to you hereunder.
(b) In consideration of this Agreement and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Answerthink, for itself and on behalf of its subsidiaries and affiliates, hereby releases you, your successors, assigns, insurers, representatives, employees, agents, attorneys, heirs,
administrators, executors, and each of them, from any and all claims, demands, charges, complaints, liabilities, obligations, indemnities, promises, agreements, contracts, covenants, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, liens, debts and expenses, of whatever kind or nature in law, equity or otherwise, which it now possesses, has possessed, or may in the future possess, against any of them, or to which it is or claims to be entitled, whether known or unknown, suspected or unsuspected, committed or omitted prior to the date of this Agreement arising from, or relating to, your employment by Answerthink, the termination of your employment with Answerthink, the Restricted Securities Agreement, the Employment Agreement and any matters related thereto, or any other transactions, occurrences, acts or omissions or any loss, damages or injury whatsoever, known or unknown, suspected or unsuspected, resulting from any act or omission by or on the part of any of the releasees (the "Answerthink Released Claims"). The Answerthink Released Claims include, but are not limited to, any action arising out of any foreign, federal, state or local constitution, statute, ordinance, regulation, or common law, including, but not limited to claims of misrepresentation, fraud, deceit, breach of contract, breach of quasi-contract, breach of implied contract, breach of the covenant of good faith and fair dealing, negligence, interference with business opportunity or with contracts, and inducing breach of contract. However, this release does not cover your obligations to comply with sections 7 and 10 of the Employment Agreement.
(c) Each of you and Answerthink recognizes that, except as limited herein, this is a full and final release of any and all claims which they, their heirs, successors and assigns have made, or could have made, against one another, arising from the Answerthink Released Claims and the Knotts Released Claims, as applicable.
(d) You warrant to Answerthink that you have not assigned or transferred any of the Knotts Released Claims. Answerthink represents and warrants to you that it has not assigned or transferred any of the Answerthink Related Claims.
(e) You acknowledge and understand that you have twenty-one (21) days after the foregoing date within which to consider this Agreement, including the Knotts Released Claims, before signing it. You understand that you have been given the opportunity to and you have in fact consulted with legal counsel of your own choosing and that if you sign this Agreement prior to the twenty-first day, you do so on a purely voluntary basis.
(f) You further understand that for a period of seven (7) days after you sign this Agreement, which includes this the Knotts Released Claims, that you may revoke or cancel it by written notification to Answerthink and by returning any sums paid to you under this Agreement, and that this Agreement, including the Release of Claims in this Section 10, will not become effective or enforceable until that seven-day period has passed.
11. Entire Agreement. This Agreement contains the entire understanding and agreement the Parties relating to the subject matter of this Agreement and it supersedes any and all prior and/or contemporaneous understandings and agreements with respect to such subject matter, all of which are merged herein. This Agreement may not be altered or amended except by an instrument in writing signed by both of the Parties hereto.
12. No Admission. The Parties agree that nothing contained in this Agreement shall constitute or be treated as an admission or acknowledgment of any liability or wrongdoing by either Party to the other Party hereto and such Party's affiliates.
13. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, without regard to its conflicts or choice of law principles. The Parties agree that the exclusive venue for the resolution of any disputes arising out of or relating to the Agreement shall be the state courts of the State of Florida and the federal courts of the United States of America located in Miami-Dade County, Florida, and each of the Parties hereby consents to the jurisdiction of said courts with respect to any such disputes. The Parties further acknowledge that they have each participated in the preparation of this Agreement with legal counsel chosen by such Party and that this Agreement shall be construed and interpreted without any presumption against either Party.
14. Waiver. Neither the waiver by either party of a breach of or default under any of the provisions of this Agreement, nor the failure of such Party, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a wavier of any provisions, rights or privileges hereunder. A waiver of any provision of this Agreement shall only be effective if evidenced by a written instrument signed by the Party granting any such waiver.
15. Further Assurances. The Parties agree to take or cause to be taken such further actions as may be necessary or as may be reasonably requested by the other Party hereto in writing in order to fully effectuate the purposes, terms, and conditions of this Agreement.
16. Assignment. This Agreement and the rights and obligations of the Parties hereunder may not be assigned by either Party without the prior written consent of the other Party, except that the assignment of this Agreement by Answerthink to any corporation which acquires a controlling interest in Answerthink common stock or all or substantially all of the assets of Answerthink pursuant to a sale of Answerthink's business shall constitute a permitted assignment of this Agreement. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective representatives, successors and permitted assigns.
17. Notice. All notices, demands, requests, or other communications which may be or are required to be given, served or sent by either Party to other Party pursuant to this Agreement or in any way relating to this Agreement shall be in writing and shall be effective delivery if hand-delivered; or if mailed by first class, registered, or certified mail (return receipt requested, postage prepaid) four (4) business day after being so
mailed to such Party at the address set forth on the first page hereof. Either Party may designate by notice in writing a new address to which any notice, demand, request, or communication may thereafter be so given, served, or sent.
18. Voluntary Agreement. You acknowledge that you have carefully read and fully understand this Agreement and execute it voluntarily and without coercion.
Please signify your acceptance of and agreement to the terms and provisions contained herein by executing this Agreement in the space provided below and returning a signed original copy to Answerthink.
ANSWERTHINK, INC.
By: /s/ Ted A. Fernandez
-----------------------------
Name:
Title: Chief Executive Officer
Date: May 18, 2001
--------------------------
/s/ Witness
-------------------------------
Witness
|
Accepted and agreed to:
/s/ Ulysses S. Knotts, III
----------------------------------
Ulysses S. Knotts, III
Date: May 18, 2001
-----------------------------
/s/ Witness
----------------------------------
Witness
|
By signing, Mr. Knotts hereby expressly waives the 21-day review period provided for in Section 10(e).
EXHIBIT 10.18
ANSWERTHINK CONSULTING GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED FEBRUARY 16, 2001)
The Board of Directors of Answerthink , Inc. (the "Company") has adopted this Employee Stock Purchase Plan (the "Plan") to enable eligible employees of the Company and its participating Affiliates (as defined below), through payroll deductions, to purchase shares of the Company's Common Stock, par value $0.01 per share (the "Common Stock"). The Plan is for the benefit of the employees of Answerthink, Inc. and any participating Affiliates. The Plan is intended to benefit the Company by increasing the employees' interest in the Company's growth and success and encouraging employees to remain in the employ of the Company or its participating Affiliates. The Plan was amended February 16, 2001 to increase the number of shares of Common Stock reserved for issuance to 2,750,000 shares and to establish a per Offering Period limit of 400,000 shares of Common Stock. The provisions of the Plan are set forth below:
1. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 26 below, the aggregate number of shares of Common Stock that may be made available for purchase by participating employees under the Plan is 2,750,000. The shares issuable under the Plan may, in the discretion of the Board of Directors of the Company (the "Board"), be either authorized but unissued shares or treasury shares.
2. ADMINISTRATION.
The Plan shall be administered under the direction of the Compensation Committee of the Board (the "Committee"). No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan.
3. INTERPRETATION.
It is intended that the Plan will meet the requirements for an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986 (the "Code"), and it is to be so applied and interpreted. Subject to the express provisions of the Plan, the Committee shall have authority to interpret the Plan, to prescribe, amend and rescind rules relating to it, and to make all other determinations necessary or advisable in administering the Plan, all of which determinations will be final and binding upon all persons.
4. ELIGIBLE EMPLOYEES.
Any employee of the Company or any of its participating Affiliates may participate in the Plan, except the following, who are ineligible to participate: (a) an employee who has been employed by the Company or any of its participating Affiliates for less than three months as of the beginning of an Offering Period (as defined in Section 7 below); (b) an employee whose customary employment is for less than five months in any calendar year; (c) an employee whose customary employment is 20 hours or less per week; and (d) an employee who, after exercising his or her rights to purchase shares under the Plan, would own shares of Common Stock (including shares that may be acquired under any outstanding options) representing five percent or more of the total combined voting power of all classes of stock of the Company. The term
"participating Affiliate" means any company or other trade or business that is a subsidiary of the Company (determined in accordance with the principles of Sections 424(e) and (f) of the Code and the regulations thereunder). The Board may at any time in its sole discretion, if it deems it advisable to do so, terminate the participation of the employees of a particular participating Affiliate.
5. PARTICIPATION IN THE PLAN.
An eligible employee may become a participating employee in the Plan by completing an election to participate in the Plan on a form provided by the Company and submitting that form to the Payroll Department of the Company. The form will authorize payroll deductions (as provided in Section 6 below) and authorize the purchase of shares of Common Stock for the employee's account in accordance with the terms of the Plan. Enrollment will become effective upon the first day of the first Offering Period.
6. OFFERINGS.
At the time an eligible employee submits his or her election to participate in the Plan (as provided in Section 5 above), the employee shall elect to have deductions made from his or her pay subject to a maximum of fifteen percent (15%) of total compensation, on each pay day following his or her enrollment in the Plan, and for as long as he or she shall participate in the Plan. The deductions will be credited to the participating employee's account under the Plan. An employee may not during any Offering Period change his or her percentage of payroll deduction for that Offering Period, nor may an employee withdraw any contributed funds, other than in accordance with Sections 14 through 20 below.
7. OFFERING PERIODS.
The Offering Periods shall be determined by the Committee. The first Offering Period under the Plan shall commence on the date determined by the Committee.
8. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE.
not listed on such an exchange, quoted on such System or traded on such a market, fair market value shall be determined by the Board in good faith.
9. TIMING OF PURCHASE; PURCHASE LIMITATION.
Unless a participating employee has given prior written notice
terminating such employee's participation in the Plan, or the employee's
participation in the Plan has otherwise been terminated as provided in Sections
15 through 20 below, such employee will be deemed to have exercised
automatically his or her right to purchase Common Stock on the last trading day
of the Offering Period (except as provided in Section 14 below) for the number
of shares of Common Stock which the accumulated funds in the employee's account
at that time will purchase at the Purchase Price, subject to the participation
adjustment provided for in Section 13 below and subject to adjustment under
Section 26 below. Notwithstanding any other provision of the Plan, no employee
may purchase in any one calendar year under the Plan and all other "employee
stock purchase plans" of the Company and its participating Affiliates shares of
Common Stock having an aggregate fair market value in excess of $25,000,
determined as of the first trading date of the Offering Period as to shares
purchased during such period. Effective upon the last trading day of the
Offering Period, a participating employee will become a stockholder with respect
to the shares purchased during such period, and will thereupon have all
dividend, voting and other ownership rights incident thereto. Notwithstanding
the foregoing, no shares shall be sold pursuant to the Plan unless the Plan is
approved by the Company's stockholders in accordance with Section 25 below.
Notwithstanding anything to the contrary in this Plan, no more than 400,000
shares shall be available for purchase by participating employees (in the
aggregate) pursuant to the Plan during any six month Offering Period.
10. ISSUANCE OF STOCK CERTIFICATES.
On the last trading day of the Offering Period, a participating employee will be credited with the number of shares of Common Stock purchased for his or her account under the Plan during such Offering Period. Shares purchased under the Plan will be held in the custody of an agent (the "Agent") appointed by the Board of Directors. The Agent may hold the shares purchased under the Plan in stock certificates in nominee names and may commingle shares held in its custody in a single account or stock certificate without identification as to individual participating employees. A participating employee may, at any time following his or her purchase of shares under the Plan, by written notice instruct the Agent to have all or part of such shares reissued in the participating employee's own name and have the stock certificate delivered to the employee.
11. WITHHOLDING OF TAXES.
To the extent that a participating employee realizes ordinary income in connection with a sale or other transfer of any shares of Common Stock purchased under the Plan, the Company may withhold amounts needed to cover such taxes from any payments otherwise due and owing to the participating employee or from shares that would otherwise be issued to the participating employee hereunder. Any participating employee who sells or otherwise transfers shares purchased under the Plan within two years after the beginning of the Offering Period in which the shares were purchased must within 30 days of such transfer notify the Payroll Department of the Company in writing of such transfer.
12. ACCOUNT STATEMENTS.
The Company will cause the Agent to deliver to each participating employee a statement for each Offering Period during which the employee purchases Common Stock under the Plan, reflecting the amount of payroll deductions during the Offering Period, the number of shares purchased for the employee's account, the price per share of the shares purchased for the employee's account and the number of shares held for the employee's account at the end of the Offering Period.
13. PARTICIPATION ADJUSTMENT.
If in any Offering Period the number of unsold shares that may be made available for purchase under the Plan pursuant to Section 1 above is insufficient to permit exercise of all rights deemed exercised by all participating employees pursuant to Section 9 above, a participation adjustment will be made, and the number of shares purchasable by all participating employees will be reduced proportionately. Any funds then remaining in a participating employee's account after such exercise will be refunded to the employee.
14. CHANGES IN ELECTIONS TO PURCHASE.
(a) A participating employee may, at any time prior to the last trading day of the Offering Period, by written notice to the Company, direct the Company to cease payroll deductions (or, if the payment for shares is being made through periodic cash payments, notify the Company that such payments will be terminated), in accordance with the following alternatives:
(i) The employee's option to purchase shall be reduced to the number of shares which may be purchased, as of the last day of the Offering Period, with the amount then credited to the employee's account; or
(ii) Withdraw the amount in such employee's account and terminate such employee's option to purchase.
(b) Any participating employee may increase or decrease his or her payroll deduction or periodic cash payments, to take effect on the first day of the next Offering Period, by delivering to the Company a new form regarding election to participate in the Plan under Section 5 above.
15. VOLUNTARY TERMINATION OF EMPLOYMENT OR DISCHARGE.
In the event a participating employee voluntarily leaves the employ of the Company or a participating Affiliate, otherwise than by retirement under a plan of the Company or a participating Affiliate, or is discharged for cause prior to the last day of the Offering Period, the amount in the employee's account will be distributed and the employee's option to purchase will terminate.
16. RETIREMENT OR SEVERANCE.
In the event a participating employee who has an option to purchase shares leaves the employ of the Company or a participating Affiliate because of retirement under a plan of the Company or a participating Affiliate, or because of termination of the employee's employment
by the Company or a participating Affiliate for any reason except discharge for cause, the participating employee may elect, within 10 days after the date of such retirement or termination, one of the following alternatives:
(a) The employee's option to purchase shall be reduced to the number of shares which may be purchased, as of the last day of the Offering Period, with the amount then credited to the employee's account; or
(b) Withdraw the amount in such employee's account and terminate such employee's option to purchase.
In the event the participating employee does not make an election within the aforesaid 10-day period, he or she will be deemed to have elected subsection 16(b) above.
17. LAY-OFF, AUTHORIZED LEAVE OR ABSENCE OR DISABILITY.
Payroll deductions for shares for which a participating employee has an option to purchase may be suspended during any period of absence of the employee from work due to lay-off, authorized leave of absence or disability or, if the employee so elects, periodic payments for such shares may continue to be made in cash.
If such employee returns to active service prior to the last day of the Offering Period, the employee's payroll deductions will be resumed and if said employee did not make periodic cash payments during the employee's period of absence, the employee shall, by written notice to the Company's Payroll Department within 10 days after the employee's return to active service, but not later than the last day of the Offering Period, elect:
(a) To make up any deficiency in the employee's account resulting from a suspension of payroll deductions by an immediate cash payment;
(b) Not to make up such deficiency, in which event the number of shares to be purchased by the employee shall be reduced to the number of whole shares which may be purchased with the amount, if any, then credited to the employee's account plus the aggregate amount, if any, of all payroll deductions to be made thereafter; or
(c) Withdraw the amount in the employee's account and terminate the employee's option to purchase.
A participating employee on lay-off, authorized leave of absence or
disability on the last day of the Offering Period shall deliver written notice
to his or her employer on or before the last day of the Offering Period,
electing one of the alternatives provided in the foregoing clauses (a), (b) and
(c) of this Section 17. If any employee fails to deliver such written notice
within 10 days after the employee's return to active service or by the last day
of the Offering Period, whichever is earlier, the employee shall be deemed to
have elected subsection 17(c) above.
If the period of a participating employee's lay-off, authorized leave of absence or disability shall terminate on or before the last day of the Offering Period, and the employee shall not resume active employment with the Company or a participating Affiliate, the employee shall receive a distribution in accordance with the provisions of Section 16 of this Plan.
18. DEATH.
In the event of the death of a participating employee while the employee's option to purchase shares is in effect, the legal representatives of such employee may, within three months after the employee's death (but no later than the last day of the Offering Period) by written notice to the Company or participating Affiliate, elect one of the following alternatives:
(a) The employee's option to purchase shall be reduced to the number of shares which may be purchased, as of the last day of the Offering Period, with the amount then credited to the employee's account; or
(b) Withdraw the amount in such employee's account and terminate such employee's option to purchase.
In the event the legal representatives of such employee fail to deliver such written notice to the Company or participating Affiliate within the prescribed period, the election to purchase shares shall terminate and the amount, then credited to the employee's account shall be paid to such legal representatives.
19. FAILURE TO MAKE PERIODIC CASH PAYMENTS.
Under any of the circumstances contemplated by this Plan, where the purchase of shares is to be made through periodic cash payments in lieu of payroll deductions, the failure to make any such payments shall reduce, to the extent of the deficiency in such payments, the number of shares purchasable under this Plan.
20. TERMINATION OF PARTICIPATION.
A participating employee will be refunded all moneys in his or her
account, and his or her participation in the Plan will be terminated if either
(a) the Board elects to terminate the Plan as provided in Section 25 below, or
(b) the employee ceases to be eligible to participate in the Plan under Section
4 above. As soon as practicable following termination of an employee's
participation in the Plan, the Company will deliver to the employee a check
representing the amount in the employee's account and a stock certificate
representing the number of whole shares held in the employee's account. Once
terminated, participation may not be reinstated for the then current Offering
Period, but, if otherwise eligible, the employee may elect to participate in any
subsequent Offering Period.
21. ASSIGNMENT.
No participating employee may assign his or her rights to purchase shares of Common Stock under the Plan, whether voluntarily, by operation of law or otherwise. Any payment of cash or issuance of shares of Common Stock under the Plan may be made only to the participating employee (or, in the event of the employee's death, to the employee's estate). Once a stock certificate has been issued to the employee or for his or her account, such certificate may be assigned the same as any other stock certificate.
22. APPLICATION OF FUNDS.
All funds received or held by the Company under the Plan may be used for any corporate purpose until applied to the purchase of Common Stock and/or refunded to participating employees. Participating employees' accounts will not be segregated.
23. NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the Plan nor any right to purchase Common Stock under the Plan confers upon any employee any right to continued employment with the Company or any of its participating Affiliates, nor will an employee's participation in the Plan restrict or interfere in any way with the right of the Company or any of its participating Affiliates to terminate the employee's employment at any time.
24. AMENDMENT OF PLAN.
25. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN.
26. EFFECT OF CHANGES IN CAPITALIZATION.
(a) CHANGES IN STOCK.
If the number of outstanding shares of Common Stock is increased or decreased or the shares of Common Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend, or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the effective date of the Plan, the number and
kinds of shares that may be purchased under the Plan shall be adjusted proportionately and accordingly by the Company. In addition, the number and kind of shares for which rights are outstanding shall be similarly adjusted so that the proportionate interest of a participating employee immediately following such event shall, to the extent practicable, be the same as immediately prior to such event. Any such adjustment in outstanding rights shall not change the aggregate Purchase Price payable by a participating employee with respect to shares subject to such rights, but shall include a corresponding proportionate adjustment in the Purchase Price per share.
(b) REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING CORPORATION.
Subject to Subsection (c) of this Section 26, if the Company shall be the surviving corporation in any reorganization, merger or consolidation of the Company with one or more other corporations, all outstanding rights under the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to such rights would have been entitled immediately following such reorganization, merger or consolidation, with a corresponding proportionate adjustment of the Purchase Price per share so that the aggregate Purchase Price thereafter shall be the same as the aggregate Purchase Price of the shares subject to such rights immediately prior to such reorganization, merger or consolidation.
(c) REORGANIZATION IN WHICH THE COMPANY IS NOT THE SURVIVING CORPORATION OR SALE OF ASSETS OR STOCK.
Upon any dissolution or liquidation of the Company, or upon a merger, consolidation or reorganization of the Company with one or more other corporations in which the Company is not the surviving corporation, or upon a sale of all or substantially all of the assets of the Company to another corporation, or upon any transaction (including, without limitation, a merger or reorganization in which the Company is the surviving corporation) approved by the Board that results in any person or entity owning more than 80 percent of the combined voting power of all classes of stock of the Company, the Plan and all rights outstanding hereunder shall terminate, except to the extent provision is made in writing in connection with such transaction for the continuation of the Plan and/or the assumption of the rights theretofore granted, or for the substitution for such rights of new rights covering the stock of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares and exercise prices, in which event the Plan and rights theretofore granted shall continue in the manner and under the terms so provided. In the event of any such termination of the Plan, the Offering Period shall be deemed to have ended on the last trading day prior to such termination, and in accordance with Section 10 above the rights of each participating employee then outstanding shall be deemed to be automatically exercised on such last trading day. The Board shall send written notice of an event that will result in such a termination to all participating employees not later than the time at which the Company gives notice thereof to its stockholders.
(d) ADJUSTMENTS.
Adjustments under this Section 26 related to stock or securities of the Company shall be made by the Committee, whose determination in that respect shall be final, binding, and conclusive.
(e) NO LIMITATIONS ON COMPANY.
The grant of a right pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets.
27. GOVERNMENTAL REGULATION.
The Company's obligation to issue, sell and deliver shares of Common Stock pursuant to the Plan is subject to such approval of any governmental authority and any national securities exchange or other market quotation system as may be required in connection with the authorization, issuance or sale of such shares.
28. STOCKHOLDER RIGHTS.
Any dividends paid on shares held by the Company for a participating employee's account will be transmitted to the employee. The Company will deliver to each participating employee who purchases shares of Common Stock under the Plan, as promptly as practicable by mail or otherwise, all notices of meetings, proxy statements, proxies and other materials distributed by the Company to its stockholders. Any shares of Common Stock held by the Agent for an employee's account will be voted in accordance with the employee's duly delivered and signed proxy instructions. There will be no charge to participating employees in connection with such notices, proxies and other materials.
29. RULE 16b-3.
Transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or any successor provision under the Securities Exchange Act of 1934, as amended. If any provision of the Plan or action by the Board fails to so comply, it shall be deemed null and void to the extent permitted by law and deemed advisable by the Board. Moreover, in the event the Plan does not include a provision required by Rule 16b-3 to be stated herein, such provision (other than one relating to eligibility requirements, or the price and amount of awards) shall be deemed automatically to be incorporated by reference into the Plan.
30. PAYMENT OF PLAN EXPENSES.
The Company will bear all costs of administering and carrying out the Plan.
* * *
Exhibit 10.30
FIRST AMENDMENT
TO
REVOLVING CREDIT AGREEMENT
WHEREAS, the Borrower and the Banks have agreed to modify certain terms and conditions of the Credit Agreement as specifically set forth in this First Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1.1 of the Credit Agreement is hereby amended as follows:
(a) The definition of "Applicable Margin" contained in
[sect]1.1 of the Credit Agreement is hereby amended by deleting the grid
which appears in such definition and substituting in place thereof the
following grid:
----------------------------------------------------------------------------------------------
Letter of Commitment
Leverage Ratio Base Rate LIBOR Rate Credit Fee Fee Rate
Tier Loans Loans Rate
----------------------------------------------------------------------------------------------
1 Less than 1.00:1.00 0.25% 1.75% 1.75% .50%
----------------------------------------------------------------------------------------------
2 Greater than or 0.50% 2.00% 2.00% .50%
equal to 1.00 but
less than 1.50:1.00
----------------------------------------------------------------------------------------------
3 Greater than or 0.75% 2.25% 2.25% .50%
equal to 1.50:1.00
----------------------------------------------------------------------------------------------
|
(b) The definition of "EBITDA" contained in [sect]1.1 of the Credit Agreement is hereby amended by deleting such definition in its entirety and restating it as follows:
(a) a counterpart of this First Amendment, executed by the Borrower, the Guarantors and the Banks, as well as the notice to be delivered pursuant to[sect]2.3 hereof; and
(b) payment in cash of an amendment fee for the pro rata accounts of the Banks in an amount of $15,000.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as a document under seal as of the date first above written.
answerthink, inc.
By: /s/ John F. Brennan
------------------------------------
Title: V.P. and Chief Financial Officer
|
FLEET NATIONAL BANK
By: /s/ Larisa B. Chilton
------------------------------------
Title: Vice President
|
RATIFICATION OF GUARANTY
The undersigned guarantor hereby acknowledges and consents to the foregoing First Amendment as of September 28, 2001 and agrees that the Guaranty dated as of November 30, 2000 from the undersigned Guarantor remains in full force and effect, and the Guarantor confirms and ratifies all of its obligations thereunder.
THINK NEW IDEAS, INC.
By: /s/ John F. Brennan
------------------------------------------
Title: V.P and Chief Financial Officer
|
Exhibit 10.30
November 13, 2001
Fleet National Bank, as Agent
100 Federal Street
Boston, Massachusetts 02110
Attn: Larisa B. Chilton, Vice President
Reference is hereby made to that certain Revolving Credit Agreement dated as of November 30, 2000 (the "Credit Agreement") by and among answerthink, inc. (the "Borrower"), Fleet National Bank and the other lending institutions listed on Schedule 1 thereto (collectively, the "Banks") and Fleet National Bank in its capacity as agent (the "Agent"). Capitalized terms which are used herein without definition shall have the same respective meanings herein as in the Credit Agreement.
Pursuant to [sec][sec].2.3 of the Credit Agreement, the Borrower
hereby notifies you that the Borrower has elected to reduce the Total
Commitment by $10,000,000 (from $25,000,000 to $15,000,000), effective today,
November 13, 2001. The Borrower has requested that the Banks and the Agent
waive the five (5) Business Day prior written notice requirement contained in
[sec][sec].2.3 of such a reduction in the Total Commitment and deem this
reduction in the Total Commitment as set forth above effective as of 9:00 a.m.
(Boston time) today, November 13, 2001. By its signature below, the Agent and
the Banks hereby consent to waiving the advance prior written notice
requirement contained in [sec][sec].2.3 of the Credit Agreement for this
reduction in the Total Commitment requested above and agree that such reduction
shall be effective as of 9:00 a.m. (Boston time) on November 13, 2001.
The parties hereto acknowledge and agree that this consent on the part of the Agent and the Banks to waive the five (5) Business Days prior written notice requirement contained in [sec][sec].2.3 of the Credit Agreement for the reduction noticed herein shall not be construed as a waiver of any other provisions of the Loan Documents or to permit the Borrower or any Subsidiary to take any other action which is prohibited by the terms of the Credit Agreement and the other Loan Documents. Except as expressly stated herein, neither the execution of this letter nor the failure of the Agent or any Bank to exercise any right or remedy constitutes a waiver of any Default or Event of Default or of such right or remedy or any other right or remedy under the Credit Agreement. This letter is
Fleet National Bank
November 13, 2001
intended to take effect as an instrument under seal under the laws of the Commonwealth of Massachusetts.
Sincerely,
answerthink, inc.
By: /s/ John F. Brennan ------------------------------------- Title: V.P. and chief Financial Officer |
ACKNOWLEDGED AND AGREED:
Fleet National Bank, individually and
as Agent
By: /s/ Larisa B. Chilton ----------------------------------- Title: Vice President |
Exhibit 21.1
ANSWERTHINK CONSULTING GROUP, INC.
LISTING OF SUBSIDIARIES
JURISDICTION OF
ANSWERTHINK, INC. FLORIDA
SUBSIDIARIES
UbiComs EOOD Bulgaria
Scott Mednick & Associates California
AnswerThink Florida, Inc. f/k/a UbiComs, Inc. Delaware
Net Cube of Delaware f/k/a Anzen Corporation Delaware
THINK New Ideas, Inc. Delaware
UbiCube Acquisition Corp. Delaware
UbiCube Group, Inc. Delaware
CFT Consulting, Inc. Florida
GCSB Acquisition Corporation Florida
Epic Acquisition Corporation Florida
Infinity Consulting Group, Inc. Indiana
NetComs Entertainment, Inc. Maine
NetComs USA, Inc. Maine
Advis Acquisition Corporation Massachusetts
Legacy Technology, Inc. Massachusetts
Delphi Partners, Inc. New Jersey
Net Cube of New Jersey f/k/a Office of the Future New Jersey
On Ramp, Inc. New York
SD Goodman Group, Inc. New York
The Hackett Group, Inc. Ohio
triSpan, Inc. Pennsylvania
Group Cortex, Inc. Pennsylvania
NetComs Europe Limited United Kingdom
NetComs Entertainment, Ltd. United Kingdom
RDI UbiComs Limited United Kingdom
|
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-69951, No. 333-90635 and No. 333-39460) of Answerthink, Inc. of our report dated February 7, 2002 relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP Miami, Florida March 26, 2002 |
Exhibit 23.1.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-87749 and No. 333-32342) of Answerthink, Inc. of our report dated February 7, 2002 relating to the consolidated financial statements and financial statement schedule, which appears in this Form 10-K. We also consent to the reference to us under the heading "Experts" in such Registration Statements.
/s/ PricewaterhouseCoopers LLP Miami, Florida March 26, 2002 |