-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KYp1n3ZECwAT3TOxldHe5/X0uUphiUj5PtPLla416QTH0tjndFysz1oXqhId69Ch 1L1AcC74dAyCMpy+etORTQ== 0000950144-98-002705.txt : 19980317 0000950144-98-002705.hdr.sgml : 19980317 ACCESSION NUMBER: 0000950144-98-002705 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980227 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980313 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAMALIE ASSOCIATES INC CENTRAL INDEX KEY: 0001038315 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 592776441 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-22645 FILM NUMBER: 98565537 BUSINESS ADDRESS: STREET 1: 200 PARK AVE STREET 2: STE 3100 CITY: NEW YORK STATE: NY ZIP: 10166-0136 BUSINESS PHONE: 8139617494 MAIL ADDRESS: STREET 1: 3903 NORTHDALE BLVD CITY: TAMPA STATE: FL ZIP: 33624 8-K 1 LAMALIE ASSOCIATES, INC. FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): February 27, 1998 LAMALIE ASSOCIATES, INC. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) FLORIDA - ------------------------------------------------------------------------------- (State of Other Jurisdiction of Incorporation) - ------------------------------------------------------------------------------- 59-2776441 - ------------------------------------------------------------------------------- (Commission File Number) (I.R.S. Employer Identification Number) 200 Park Avenue, New York, New York 10166-0136 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 953-7900 - ------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - ------------------------------------------------------------------------------- 2 This Report on Form 8-K contains forward-looking statements that are based on the current beliefs and expectations of the Company's management, as well as assumptions made by, and information currently available to, the Company's management. Such statements include those regarding general economic and executive search industry trends. Because such statements involve risks and uncertainties, actual actions and strategies and the timing and expected results thereof may differ materially from those expressed or implied by such forward-looking statements, and the Company's future results, performance, or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Future events and actual results could differ materially from those set forth in or underlying the forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted. These potential risks and uncertainties include dependence on attracting and retaining qualified executive search consultants, portability of client relationships, restrictions imposed by blocking arrangements, competition, relationship with Amrop International alliance of executive search firms, implementation of acquisition strategy, reliance on information processing systems, and employment liability risk. In addition to the factors noted above, other risks, uncertainties, assumptions, and factors that could affect the Company's financial results are described in the Company's Registration Statement on Form S-1 (File No. 333-26027), originally filed with the Securities and Exchange Commission April 29, 1997, as amended and as effective July 1, 1997. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. Ward Howell International, Inc. On February 27, 1998, the Company completed the acquisition by merger of Ward Howell International, Inc. ("WHI"), the eighth largest executive search firm in the United States. WHI was merged into a wholly-owned subsidiary of the Company and WHI was the surviving corporation in the merger. The purchase price was determined through arms-length negotiations by the parties and is subject to adjustment based on transaction expenses and certain other items as detailed in the plan of merger. Prior to this transaction, neither the Company, WHI nor any of their affiliates had a material relationship. In connection with the merger, the Company entered into employment agreements with substantially all of the former WHI shareholders. The purchase consideration was valued at approximately $20 million and consisted of $8.7 million in cash, $7.6 million in notes payable over three years with interest payable at 5 percent per annum, and approximately 190,000 shares of the Company's common stock. Approximately $8.7 million of the purchase consideration was derived from the proceeds of the Company's initial public offering which had been invested in short-term investment securities since July 1997. The acquisition was accounted for as a stock purchase. Chartwell Partners International, Inc. On January 13, 1998, the Company filed a report on Form 10-Q with respect to the acquisition of Chartwell Partners International, Inc. ("CPI"). At that time, the Company was in the process of compiling financial statements and related information to determine whether the assets acquired from CPI constituted a "significant amount of assets" within the meaning of Item 2 of Form 8-K. The Company stated in such Form 10-Q that it intended to file any required financial statements under applicable regulations as soon as practicable, but in any event, no later than 60 days after January 20, 1998, the date on which a Current Report on Form 8-K would have been due to have been filed in respect of the CPI acquisition. The Company has determined that the assets acquired from CPI constitute a "significant amount of assets" within the meaning of Item 2 of Form 8-K and is therefore including the required financial statements and pro forma financial information in this Form 8-K. 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. WHI AUDITED HISTORICAL FINANCIAL STATEMENTS Independent Auditors' Report Balance Sheets as of December 31, 1996 and 1995 Statements of Operations for the years ended December 31, 1996, 1995 and 1994 Statements of Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994 Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 Notes to Financial Statements WHI UNAUDITED INTERIM FINANCIAL STATEMENTS Condensed Balance Sheets as of September 30, 1997 and December 31, 1996 Condensed Statements of Operations for the nine months ended September 30, 1997 and 1996 Condensed Statements of Cash Flows for the nine months ended September 30, 1997 and 1996 Notes to Condensed Financial Statements CPI AUDITED HISTORICAL FINANCIAL STATEMENTS Report of Independent Certified Public Accountants Balance Sheet as of December 31, 1996 Statement of Income for the year ended December 31, 1996 Statement of Stockholder's Equity for the year ended December 31, 1996 Statement of Cash Flows for the year ended December 31, 1996 Notes to Financial Statements CPI UNAUDITED INTERIM FINANCIAL STATEMENTS Condensed Balance Sheets as of September 30, 1997 and December 31, 1996 Condensed Statements of Income for the nine months ended September 30, 1997 and 1996 Condensed Statements of Cash Flows for the nine months ended September 30, 1997 and 1996 Notes to Condensed Financial Statements (b) PRO FORMA FINANCIAL INFORMATION. Introduction to Unaudited Pro Forma Combined Financial Statements Unaudited Pro Forma Combined Balance Sheet as of November 30, 1997 Unaudited Pro Forma Combined Statement of Operations for the year ended February 28, 1997 Unaudited Pro Forma Combined Statement of Operations for the nine months ended November 30, 1997 Notes to Unaudited Pro Forma Combined Financial Statements
4 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (Continued) (c) EXHIBITS.
Exhibit Number Description -------------- ----------- 2.1 Agreement and Plan of Merger dated February 27, 1998, by and among Lamalie Associates, Inc., LAI Mergersub, Inc. and Ward Howell International, Inc. 2.2 Asset Purchase Agreement dated December 29, 1997, by and among Lamalie Associates, Inc., Chartwell Partners International, Inc. and David M. DeWilde 10.14 Form of Employment Agreement for former Ward Howell International, Inc. Shareholders 23.9 Consent of Arthur Andersen LLP 23.10 Consent of KPMG Peat Marwick LLP
5 INDEPENDENT AUDITORS' REPORT The Board of Directors Ward Howell International, Inc.: We have audited the accompanying balance sheets of Ward Howell International, Inc. (the "Company") as of December 31, 1996 and 1995, and the related statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ward Howell International, Inc. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP August 1, 1997 6 WARD HOWELL INTERNATIONAL, INC. Balance Sheets December 31, 1996 and 1995
ASSETS 1996 1995 ---- ---- Current assets: Cash and cash equivalents $ 1,437,234 149,487 Accounts receivable including client disbursements, net of allowance for doubtful accounts of approximately $726,000 in 1996 and $512,000 in 1995 7,226,873 4,636,791 Employee advances 346,149 338,800 Due from joint venture -- 29,600 Deferred income taxes (note 6) 136,817 436,451 Prepaid income taxes 107,984 142,780 Prepaid expenses and other current assets 107,174 45,835 ------------ --------- Total current assets 9,362,231 5,779,744 ------------ --------- Fixed assets, at cost: Furniture, fixtures and equipment 1,598,374 1,564,232 Computers and related costs 1,821,307 1,682,682 Leasehold improvements 262,769 250,023 Assets acquired under capital leases 103,746 110,156 ------------ --------- 3,786,196 3,607,093 Less accumulated depreciation and amortization (3,179,067) (2,965,279) ------------ --------- Net fixed assets 607,129 641,814 Investment in joint ventures 67,028 52,693 Noncurrent deferred income taxes -- -- Other 344,698 301,731 ------------ --------- Total assets $ 10,381,086 6,775,982 ============ =========
7 WARD HOWELL INTERNATIONAL, INC. Balance Sheets, Continued
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995 ---- ---- Current liabilities: Current portion of notes payable to related parties (note 2) $ 33,021 85,337 Current portion of installment notes payable (note 2) 50,069 57,636 Due to joint venture (note 2) 25,022 109,799 Accounts payable and accrued liabilities 1,608,144 358,404 Accrued profit-sharing contribution and bonuses (note 4) 3,578,531 2,408,181 Accrued commissions 3,117,336 2,538,013 Current portion of obligations under capital leases -- 10,107 ------------ --------- Total current liabilities 8,412,123 5,567,477 Notes payable to related parties, net of current portion (note 2) 42,967 75,987 Installment notes payable, net of current portion (note 2) 78,565 131,268 Deferred rent (note 3) 305,418 338,796 Noncurrent deferred income taxes (note 6) 52,104 15,077 Other long-term liabilities -- 3,227 ------------ --------- Total liabilities 8,891,177 6,131,832 Shareholders' equity: Common stock, $1 par value; 5,000 shares authorized; 2,136 shares and 1,664 shares issued and outstanding in 1996 and 1995, respectively (note 7) 2,136 1,664 Additional paid-in capital 1,170,248 681,728 Retained earnings 487,599 149,662 ------------ --------- 1,659,983 833,054 Less: Shareholders' notes receivable (note 5) (170,074) (188,904) ------------ --------- Total shareholders' equity 1,489,909 664,150 Commitments and contingencies (notes 3 and 8) ------------ --------- Total liabilities and shareholders' equity $ 10,381,086 6,775,982 ============ =========
See accompanying notes to financial statements. 8 WARD HOWELL INTERNATIONAL, INC. Statements of Operations Years ended December 31, 1996, 1995 and 1994
1996 1995 1994 ---- ---- ---- Fee revenues $ 25,137,840 17,063,083 16,484,312 Operating expenses: Compensation and benefits 22,370,604 15,318,795 14,191,257 General and administrative expenses (notes 3 and 4) 2,078,613 2,271,293 2,144,007 ------------ ---------- ---------- Total operating expenses 24,449,217 17,590,088 16,335,264 ------------ ---------- ---------- Earnings (loss) from operations 688,623 (527,005) 149,048 Equity in net income of joint ventures 14,335 8,193 70,548 Other income (expense): Interest income (note 5) 33,936 31,021 22,595 Interest expense (note 2) (16,512) (5,868) (48,240) ------------ ---------- ---------- 17,424 25,153 (25,645) ------------ ---------- ---------- Earnings (loss) before income taxes 720,382 (493,659) 193,951 Income tax expense (benefit) (note 6) 382,445 (111,980) 133,720 ------------ ---------- ---------- Net earnings (loss) $ 337,937 (381,679) 60,231 ============ ========== ==========
See accompanying notes to financial statements. 9 WARD HOWELL INTERNATIONAL, INC. Statements of Shareholders' Equity Years ended December 31, 1996, 1995 and 1994
Additional Shareholders' Total Common paid-in Retained Treasury notes shareholders' stock capital earnings stock receivable equity ------- --------- -------- -------- ------------ ------------ Balance at December 31, 1993 $1,612 625,178 471,110 (22,134) (215,487) 860,279 Repurchase of 116 shares of treasury stock -- -- -- (120,176) 101,231 (18,945) Issuance of 140 shares of treasury stock -- -- -- 142,310 (136,539) 5,771 Issuance of 52 shares of common stock 52 56,550 -- -- -- 56,602 Net earnings -- -- 60,231 -- -- 60,231 ------ ------- ------- ------ -------- --------- Balance at December 31, 1994 1,664 681,728 531,341 -- (250,795) 963,938 Repurchase of 320 shares of treasury stock -- -- -- (331,520) 219,483 (112,037) Issuance of 320 shares of treasury stock -- -- -- 331,520 (200,000) 131,520 Payment from shareholders -- -- -- -- 42,408 42,408 Net loss -- -- (381,679) -- -- (381,679) ------ --------- ------- ------ -------- --------- Balance at December 31, 1995 1,664 681,728 149,662 -- (188,904) 644,150 Payment from shareholders -- -- -- -- 60,270 60,270 Issuance of 472 shares of common stock 472 488,520 -- -- (41,440) 447,552 Net earnings -- -- 337,937 -- -- 337,937 ------ --------- ------- ------ -------- --------- Balance at December 31, 1996 $2,136 1,170,248 487,599 -- (170,074) 1,489,909 ====== ========= ======= ====== ======== =========
See accompanying notes to financial statements. 10 WARD HOWELL INTERNATIONAL, INC. Statements of Cash Flows Years ended December 31, 1996, 1995 and 1994
1996 1995 1994 ---- ---- ---- ---------- -------- -------- Cash flows from operating activities: Net earnings (loss) $ 337,937 (381,679) 60,231 ---------- -------- -------- Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Equity in net income of joint venture (14,335) (8,193) (70,548) Depreciation and amortization 213,787 233,514 230,610 Provision for doubtful accounts 965,625 361,564 684,421 Deferred rent (78,971) 30,210 86,353 Deferred income taxes 336,661 (203,430) 19,056 Changes in operating assets and liabilities: Accounts receivable (3,555,707) (1,145,366) (548,326) Employee advances (7,349) (49,121) 53,610 Due from joint venture 29,600 (29,600) -- Prepaid expenses and other current assets (61,339) 80,189 (56,296) Prepaid income taxes 34,796 (67,252) (75,528) Other (42,967) (25,445) (119,099) Accounts payable and accrued liabilities 1,295,333 57,643 (254,744) Accrued commissions 579,323 769,694 322,425 Accrued profit sharing contribution and bonuses 1,170,350 159,535 518,962 Income taxes payable -- -- (164,526) Due to joint ventures (84,777) (161,881) 211,482 Other long-term liabilities (3,227) (67,162) (67,162) ---------- ---------- -------- Total adjustments 776,803 (65,101) 770,690 ---------- ---------- -------- Net cash provided by (used in) operating activities 1,114,740 (446,780) 830,921 ---------- ---------- -------- Cash flows from investing activities: Distributions from ventures -- -- 56,048 Purchases of fixed assets (179,102) (175,082) (397,120) ---------- -------- -------- Net cash used in investing activities (179,102) (175,082) (341,072)
11 WARD HOWELL INTERNATIONAL, INC. Statements of Cash Flows, Continued
1996 1995 1994 ---- ---- ---- Cash flows from financing activities: Sales of treasury stock $ -- 131,520 5,771 Purchases of stock for treasury -- (112,037) (18,945) Payments on notes payable, net (145,606) (51,215) 43,921 Shareholders' payment on notes receivable 18,830 42,408 -- Payments on capital lease obligations (10,107) (10,737) (20,267) Sale of common stock 488,992 -- 56,602 ----------- ------- ------- Net cash provided by (used in) financing activities 352,109 (61) 67,082 ----------- ------- ------- Net increase (decrease) in cash and cash equivalents 1,287,747 (621,923) 556,931 Cash and cash equivalents, beginning of year 149,487 771,410 214,479 ----------- ------- ------- Cash and cash equivalents, end of year $ 1,437,234 149,487 771,410 =========== ======= ======= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 18,170 9,424 25,000 =========== ======= ======= Taxes $ 71,062 177,600 355,000 =========== ======= ======= Noncash financing activities: Shareholder notes receivable, net $ (41,440) 19,483 -- =========== ======= =======
See accompanying notes to financial statements. 12 WARD HOWELL INTERNATIONAL, INC. Notes to Financial Statements December 31, 1996, 1995 and 1994 (1) ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND BASIS OF PRESENTATION Ward Howell International, Inc. (the "Company") was incorporated in 1951 in the State of Connecticut. The Company is part of the Ward Howell International Group, which unites 20 autonomous firms worldwide into one organization for the purpose of sharing resources, information and conducting international executive searches. These searches relate to all management disciplines in business, industry, government, education, health care and foundations. The Company has offices in New York, Barrington, Chicago, Dallas, Encino, Houston, Stamford, Atlanta, Phoenix and Wisconsin. During 1993, the Company entered into two corporate joint ventures, Ward Howell Russia, Inc. and Ward Howell Technologies, Inc., in which it initially acquired a 33% and a 50% equity interest, respectively. These two join ventures were established to penetrate the Eastern Europe and high-tech markets for executive search. The Company accounts for its investments in joint ventures using the equity method of accounting. At December 31, 1996, 1995 and 1994, the Company had a 30% interest in Ward Howell Russia, Inc. Ward Howell Technologies, Inc. had been dissolved and the Company's investment was written off in 1994. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION The Company generates substantially all of its revenues from fees for professional services, which are recognized as fee revenue as clients are billed, generally over a 60- to 90-day period commencing with the initial acceptance of a search. Fee revenue is presented net of adjustments to original billings. DEPRECIATION AND AMORTIZATION Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which generally approximate five years. Leasehold improvements are amortized over the terms of the related leases or the estimated useful lives of the improvements, whichever is less. INCOME TAXES Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 13 WARD HOWELL INTERNATIONAL, INC. Notes to Financial Statements, Continued (1), CONTINUED CASH EQUIVALENTS The Company considers all highly liquid financial instruments with a maturity of three months or less when purchased to be cash equivalents. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires management to make a number of estimates and assumptions that affect the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (2) RELATED PARTY TRANSACTIONS Notes payable to related parties represent amounts due to former shareholders for repurchases of common stock. The notes are payable in annual installments with maturities from 1996 through 2000, and bear interest at rates ranging from 5.8% to 7.94% at December 31, 1996. Interest expense on notes payable aggregated approximately $8,000, $6,000 and $21,000 in 1996, 1995 and 1994, respectively, including approximately $3,000, $5,000 and $9,000 that was accrued at December 31, 1996, 1995 and 1994, respectively. In addition, the Company has outstanding installment notes payable that have been guaranteed by certain shareholders. These notes are payable in monthly installments through 1999 and bear interest at the prime rate plus one and one-half percent. At December 31, 1996, the prime rate was 8.25%. Aggregate future maturities of notes payable as of December 31, 1996 are approximately as follows:
Year ending December 31 Amount ----------------------- ------ 1997 $ 83,000 1998 69,000 1999 48,000 2000 5,000 -------- $205,000 ========
Included in due to joint ventures are commissions owed to the joint ventures and fees collected on behalf of the joint ventures. 14 WARD HOWELL INTERNATIONAL, INC. Notes to Financial Statements, Continued (3) RENT EXPENSE AND COMMITMENTS The Company leases its office facilities under agreements that provide for scheduled rent increases and rent abatements. Rent expense is recognized on a straight-line basis, rather than in accordance with lease payment schedules, for purposes of recognizing a consistent annual rent expense. Scheduled base rent increases and the effects of rent abatements are spread evenly over the terms of the respective leases in order to effect a straight-line rent expense amount over the term of the related leases. Noncancelable leases for office space expire on various dates through 2003. The following is a schedule of approximate future minimum lease payments:
Year Amount ---- ------- 1997 $ 955,000 1998 810,000 1999 758,000 2000 635,000 2001 535,000 Thereafter 669,000 ---------- $4,362,000 ==========
The leases provide for additional payments for real estate taxes and other costs. In 1996, 1995 and 1994, rent expense aggregated approximately $1,028,000, $1,057,000, and $1,039,000, respectively. (4) PROFIT SHARING 401(K) PLAN The Company has a profit-sharing 401(k) plan that covers substantially all employees. Contributions to the plan by the Company are limited to 15% of participants' aggregate annual compensation with limitations on contributions for each participant of 25% of compensation not to exceed $30,000. Excess amounts (amounts in excess of $30,000) may be paid in the form of bonuses. Profit-sharing expense pertaining to the 401(k) plan for 1996, 1995 and 1994, net of forfeitures, was approximately $1,156,600, $1,057,000 and $1,386,000, respectively, and is included in the accompanying statements of operations in profit sharing contribution and general and administrative expenses. (5) SHAREHOLDERS' NOTES RECEIVABLE Shareholders' notes receivable represent amounts due for the purchase by shareholders of common stock. The notes are due in annual installments with maturities from 1995 through 1998, and bear interest at 5.88% per annum. 15 WARD HOWELL INTERNATIONAL, INC. Notes to Financial Statements, Continued (6) INCOME TAXES Income tax expense (benefit) for the years ended December 31, 1996 and 1995 is composed of the following components:
1996 1995 1994 ---- ---- ---- Current: Federal $ 9,734 -- 95,087 State 36,050 66,900 19,577 Deferred 336,661 (178,880) 19,056 --------- -------- ------- $ 382,445 (111,980) 133,720 ========= ======== =======
Deferred income taxes included in the respective balance sheets reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts reported for income tax purposes. A schedule of the temporary differences and the related tax effect follows:
1996 1995 ---- ---- Allowance for doubtful accounts $ 148,830 104,960 Depreciation and amortization (52,104) (20,500) Accrued lease termination costs 1,323 27,134 Tax credit/other carryforward (13,336) 309,780 --------- ------- $ 84,713 421,374 ========= =======
The Company's deferred tax assets and liabilities as of December 31, 1996 and 1995 consist of the following:
1996 1995 ----------------------- ----------------------- Current Noncurrent Current Noncurrent ------- ---------- ------- ---------- Assets $150,153 -- 436,451 126,658 Liabilities (13,336) (52,104) -- (141,735) -------- ------- ------- -------- Net deferred tax assets (liabilities) $136,817 (52,104) 436,451 (15,077) ======== ======= ======= ========
In 1996 and 1995, the difference between the effective tax rate and the Federal statutory rate is due primarily to Federal graduated rates, state and local taxes and certain meals and entertainment expenses that are not deductible for tax purposes. 16 WARD HOWELL INTERNATIONAL, INC. Notes to Financial Statements, Continued (7) COMMON STOCK Common stock is issued at a price of $1,036 per share or book value per share, as defined, whichever is greater. The book value per share at December 31, 1996 and 1995 was $777 and $501, respectively. For purposes of calculating book value per share, shareholders' notes receivable are not deducted from shareholders' equity. Upon a shareholder's termination of employment or the occurrence of certain other events, the Company has the first right and option to purchase the common stock held by the shareholder at a price of $1,036 per share or book value per share, as defined, whichever is greater. (8) SHORT-TERM BORROWINGS The Company had available a line of credit with a bank in the amount of $800,000. Borrowings under this line of credit were secured by the Company's accounts receivable and carried interest at the rate of prime plus 1%. There were no such borrowings at December 31, 1996 and 1995. 17 WARD HOWELL INTERNATIONAL, INC. CONDENSED BALANCE SHEETS (unaudited)
As of ------------------------------ ASSETS 9/30/97 12/31/96 ------------- ------------- Current assets: Cash and cash equivalents $ 1,002,443 $ 1,437,234 Accounts receivable 8,139,765 7,226,873 Employee advances 993,716 346,149 Deferred income taxes 136,817 136,817 Prepaid income taxes 120,494 107,984 Prepaid expenses and other current assets 43,618 107,174 ------------- ------------- Total current assets 10,436,853 9,362,231 Fixed assets, net 956,870 607,129 Investment in joint venture 99,728 67,028 Other assets 345,345 344,698 ------------- ------------- Total assets $ 11,838,796 $ 10,381,086 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of notes payable to related parties $ 33,021 $ 33,021 Current portion of installment notes payable 50,069 50,069 Due to joint venture 53,588 25,022 Accounts payable and accrued liabilities 617,430 1,608,144 Accrued compensation 9,017,403 6,695,867 ------------- ------------- Total current liabilities 9,771,511 8,412,123 Notes payable to related parties, net of current portion 50,350 42,967 Installment notes payable, net of current portion 36,037 78,565 Deferred rent 273,463 305,418 Deferred income taxes 52,104 52,104 ------------- ------------- Shareholders' equity: Common stock, $1 par value; 5,000 shares authorized; 2,146 and 2,136 shares issued and outstanding, respectively 2,146 2,136 Additional paid-in capital 1,180,598 1,170,248 Retained earnings 558,693 487,599 Less: subscriptions receivable (86,106) (170,074) ------------- ------------- Total shareholders' equity 1,655,331 1,489,909 ------------- ------------- Total liabilities and shareholders' equity $ 11,838,796 $ 10,381,086 ============= =============
The accompanying notes are an integral part of these condensed financial statements. 18 WARD HOWELL INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, (unaudited)
1997 1996 ------------- ------------- Fee revenue, net $ 19,394,195 $ 18,611,302 Operating expenses: Compensation and benefits 16,958,109 16,259,327 General and administrative expenses 2,383,985 1,793,215 ------------- ------------- Total operating expenses 19,342,094 18,052,542 ------------- ------------- Income from operations 52,101 558,760 Equity in net income from joint venture 37,303 10,751 Other income (expense): Interest income 49,179 15,849 Interest expense (9,581) (10,448) ------------- ------------- Income before income taxes 129,002 574,912 Income tax expense 57,908 305,255 ------------- ------------- Net income $ 71,094 $ 269,657 ============= =============
The accompanying notes are an integral part of these condensed financial statements. 19 WARD HOWELL INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, (unaudited)
1997 1996 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 71,094 $ 269,657 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 213,788 151,831 Equity in net income of joint venture (37,303) (10,751) Changes in operating assets and liabilities (178,024) 1,329,967 ------------ ------------ Net cash provided by operating activities 69,555 1,740,704 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (563,529) (70,891) ------------ ------------ Net cash used in investing activities (563,529) (70,891) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of debt (35,145) (87,911) Proceeds from issuance of common stock 94,328 507,821 ------------ ------------ Net cash provided by financing activities 59,183 419,910 ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (434,791) 2,089,723 CASH AND CASH EQUIVALENTS, at beginning of period 1,437,234 149,487 ------------ ------------ CASH AND CASH EQUIVALENTS, at end of period $ 1,002,443 $ 2,239,210 ============ ============
The accompanying notes are an integral part of these condensed financial statements. 20 WARD HOWELL INTERNATIONAL, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 1. Interim Financial Information The interim financial data is unaudited; however, in the opinion of Ward Howell International, Inc. ("WHI"), the interim data includes all adjustments, consisting only of normal recurring accruals, necessary for a fair statement of the results of the interim periods. The results of operations for the nine months ended September 30, 1997, are not necessarily indicative of the results that can be expected for the entire fiscal year ending December 31, 1997. 21 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholder of Chartwell Partners International, Inc.: We have audited the accompanying balance sheet of Chartwell Partners International, Inc. (a California corporation) as of December 31, 1996, and the related statements of income, stockholder's equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Chartwell Partners International, Inc. as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Tampa, Florida, February 27, 1998 22 CHARTWELL PARTNERS INTERNATIONAL, INC. BALANCE SHEET -- DECEMBER 31, 1996
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 14,664 Accounts receivable 591,247 -------- Total current assets 605,911 PROPERTY AND EQUIPMENT, net 119,165 OTHER ASSETS 6,259 -------- Total assets $731,335 ======== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 33,017 Accrued compensation 274,867 Current maturities of long-term debt 20,000 -------- Total current liabilities 327,884 -------- LONG-TERM DEBT, less current maturities 31,667 COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY: Common stock, no par value, 100,000 shares authorized, 10,000 shares issued and outstanding 100,000 Retained earnings 271,784 -------- Total stockholder's equity 371,784 -------- Total liabilities and stockholder's equity $731,335 ========
The accompanying notes are an integral part of this balance sheet. 23 CHARTWELL PARTNERS INTERNATIONAL, INC. STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 FEE REVENUE, net $2,618,264 OPERATING EXPENSES: Compensation and benefits 1,896,098 General and administrative expenses 547,030 ---------- Total operating expenses 2,443,128 ---------- OPERATING INCOME 175,136 INTEREST INCOME, net 19,850 ---------- INCOME BEFORE PROVISION FOR INCOME TAXES 194,986 PROVISION FOR INCOME TAXES 6,300 ---------- NET INCOME $ 188,686 ========== NET INCOME PER SHARE $18.87 ========== WEIGHTED AVERAGE SHARES OUTSTANDING 10,000 ==========
The accompanying notes are an integral part of this statement. 24 CHARTWELL PARTNERS INTERNATIONAL, INC. STATEMENT OF STOCKHOLDER'S EQUITY FOR THE YEAR ENDED DECEMBER 31, 1996
Common Stock Total ----------------------- Retained Stockholder's Shares Amount Earnings Equity ------ -------- --------- ------------ BALANCE, December 31, 1995 10,000 $100,000 $ 278,012 $ 378,012 Dividends -- -- (194,914) (194,914) Net income -- -- 188,686 188,686 ------ -------- --------- --------- BALANCE, December 31, 1996 10,000 $100,000 $ 271,784 $ 371,784 ====== ======== ========= =========
The accompanying notes are an integral part of this statement. 25 CHARTWELL PARTNERS INTERNATIONAL, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $188,686 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 12,194 Changes in assets and liabilities- Accounts receivable (73,695) Other current assets 8,058 Accounts payable and accrued liabilities 25,897 Other current liabilities (2,667) Accrued compensation 134,495 -------- Net cash provided by operating activities 292,968 -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (103,541) -------- Net cash used in investing activities (103,541) -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (20,000) Dividends paid (194,914) -------- Net cash used in financing activities (214,914) -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (25,487) CASH AND CASH EQUIVALENTS, beginning of year 40,151 -------- CASH AND CASH EQUIVALENTS, end of year $ 14,664 ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for- Interest $ 6,153 Income taxes $ 6,300
The accompanying notes are an integral part of this statement. 26 CHARTWELL PARTNERS INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: Organization Chartwell Partners International, Inc. (the Company) is an executive search firm specializing in the recruitment of executives on behalf of its clients. The Company contracts with its clients, primarily on a retainer basis, to provide consulting advice on the identification, evaluation, attraction, and recommendation of qualified candidates for specific positions. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investment instruments with original maturities of three months or less to be cash equivalents. Property and Equipment Office furniture and equipment is stated at cost less accumulated depreciation using the straight-line method of depreciation over its estimated useful lives of five years. Computer equipment is stated at cost less accumulated depreciation using the straight-line method of depreciation over its estimated useful lives of two and one-half years. Repair and maintenance costs which do not extend the useful lives of the related assets are expensed as incurred. Revenue Recognition The Company derives substantially all of its revenues from professional services, which are recognized as fee revenue as clients are billed, generally over a 60- to 90-day period commencing with the initial acceptance of a search. Fee revenue is presented net of adjustments to original billings. 27 Income Taxes The Company reports its earnings under the provisions of Subchapter S of the Internal Revenue Code. Accordingly, net income is reported through the stockholder's individual income tax return, and the resulting federal tax liability is the responsibility of the individual stockholder. The provision for income taxes relates to state income taxes owed by the Company for the year ended December 31, 1996. Net Income Per Share Net income per share is determined by dividing the net income by the weighted average number of shares of common stock outstanding during the period. There were no common equivalent shares outstanding during the year ended December 31, 1996. Concentration of Credit Risk Financial instruments which potentially expose the Company to concentration of credit risk consist primarily of accounts receivable. Credit risk arising from accounts receivable is minimal due to the large number of customers comprising the Company's customer base. The customers are concentrated primarily in the Company's United States market area. For the year ended December 31, 1996, the Company derived approximately 17 percent of its revenues from a single customer. Fair Value of Financial Instruments The carrying amounts of the Company's financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, accrued compensation and current maturities of long-term debt at December 31, 1996, approximate fair value because of the short maturities of these instruments. The carrying amount of the Company's long-term debt approximates fair value at December 31, 1996, based on current market rates of interest and maturities. 28 Newly Issued Accounting Standards In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share" (SFAS 128). SFAS 128 establishes new standards for computing and presenting earnings per share (EPS). Specifically, SFAS 128 replaces the presentation of primary EPS with a presentation of basic EPS, requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997; earlier application is not permitted. EPS computed under SFAS 128 would have been the same as reflected on the accompanying statement of income. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits" (SFAS 132). SFAS 132 revises employers' disclosures about pension and other postretirement benefit plans. SFAS 132 is effective for fiscal years beginning after December 15, 1997; earlier application is encouraged. Management has implemented SFAS 132 for the year ended December 31, 1996. 2. PROPERTY AND EQUIPMENT: Property and equipment consisted of the following as of December 31, 1996:
Amount --------- Office furniture and equipment $ 84,284 Computer equipment 65,715 -------- 149,999 Less- Accumulated depreciation (30,834) -------- $119,165 ========
29 3. LONG-TERM DEBT: Long-term debt consisted of a Term Loan (the Loan) bearing interest at the bank's reference rate plus 1.5 percent (9.75 percent at December 31, 1996). The Loan requires monthly principal payments of $1,667 plus accrued interest. The Loan matures on June 1, 1999. Aggregate principal amounts due under the Loan as of December 31, 1996, are as follows:
Year Ending December 31, Amount ------------ ------- 1997 $20,000 1998 20,000 1999 11,667 ------- $51,667 =======
The Company maintains a revolving Line of Credit (the Line) which provides for maximum borrowings of $200,000, bearing interest at the bank's reference rate plus 1.5 percent (9.75 percent at December 31, 1996). The Line expires on May 15, 1997. No amounts were outstanding under the Line as of December 31, 1996. Under the terms of the Loan and the Line, the Company is required to maintain, among other restrictions, minimum net income levels, current ratio and liabilities to net worth ratios. In addition, the Loan and the Line contain restrictions on asset dispositions, additional debt and changes in ownership. As of December 31, 1996, the Company was in compliance with the terms and covenants of the Loan and the Line. 4. EMPLOYEE BENEFIT PLANS: Defined Contribution 401(k) Profit Sharing Plan The Company maintains a defined contribution 401(k) profit sharing plan. For the year ended December 31, 1996, the Company did not make a contribution to this plan. Money Purchase Pension Plan The Company maintains a money purchase pension plan. For the year ended December 31, 1996, the Company has accrued for contributions totaling approximately $65,986, which are reflected in accrued compensation in the accompanying balance sheet. 30 5. COMMITMENTS AND CONTINGENCIES: Operating Leases The Company leases certain office space under a non-cancelable operating lease. Aggregate future minimum lease payments under this lease are as follows:
Year Ending December 31, Amount ------------ --------- 1997 $ 98,796 1998 98,796 --------- $ 197,592 =========
Rent expense totaled $98,796 for the year ended December 31, 1996. 6. SUBSEQUENT EVENT: On January 2, 1998, the Company entered into an asset sale agreement with Lamalie Associates, Inc. (LAI) to sell certain assets of the Company. The sales price was approximately $3.1 million and was paid with approximately $1.4 million of cash, a $1.25 million convertible subordinated note and LAI's common stock. 31 CHARTWELL PARTNERS INTERNATIONAL, INC. CONDENSED BALANCE SHEETS
As of ----------------------------- 9/30/97 12/31/96 ---------- -------- (unaudited) ASSETS Current assets: Cash and cash equivalents $1,023,635 $ 14,664 Accounts receivable 544,307 591,247 Prepaid expenses 9,019 -- ---------- -------- Total current assets 1,576,961 605,911 ---------- -------- Property and equipment, net 132,714 119,165 Other assets 6,259 6,259 ---------- -------- Total assets $1,715,934 $731,335 ========== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable and accrued liabilities $ 107,721 $ 33,017 Accrued compensation 889,692 274,867 Current maturities of long-term debt 20,000 20,000 ---------- -------- Total current liabilities 1,017,413 327,884 Long-term debt, less current maturities 16,667 31,667 Commitments and contingencies Stockholder's equity: Common stock; no par value; 100,000 shares authorized; 100,000 100,000 10,000 shares issued and outstanding Retained earnings 581,854 271,784 ---------- -------- Total stockholder's equity 681,854 371,784 ---------- -------- Total liabilities and stockholder's equity $1,715,934 $731,335 ========== ========
The accompanying notes are an integral part of these condensed financial statements. 32 CHARTWELL PARTNERS INTERNATIONAL, INC. CONDENSED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, (unaudited)
1997 1996 ---------- ---------- Fee revenue, net $2,803,653 $1,863,371 Operating expenses: Compensation and benefits 2,192,543 1,422,074 General and administrative expenses 317,857 342,148 ---------- --------- Total operating expenses 2,510,400 1,764,222 ---------- --------- Operating income 293,253 99,149 Interest income, net 18,459 15,823 ---------- -------- Income before provision for income taxes 311,712 114,972 Provision for income taxes 1,642 3,347 ---------- --------- Net income $ 310,070 $ 111,625 ========== =========
The accompanying notes are an integral part of these condensed financial statements. 33 CHARTWELL PARTNERS INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, (unaudited)
1997 1996 ---------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: $ 310,070 $111,625 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 42,628 24,008 Changes in operating assets and liabilities 727,450 800,297 ---------- -------- Net cash provided by operating activities 1,080,148 935,930 ---------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (56,177) (42,798) ---------- -------- Net cash used in investing activities (56,177) (42,798) ---------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of debt (15,000) (15,000) Dividends paid -- (104,914) ---------- -------- Net cash used in financing activities (15,000) (119,914) ---------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 1,008,971 773,218 CASH AND CASH EQUIVALENTS, at beginning of period 14,664 40,151 ---------- -------- CASH AND CASH EQUIVALENTS, at end of period $1,023,635 $813,369 ========== ========
The accompanying notes are an integral part of these condensed financial statements. 34 CHARTWELL PARTNERS INTERNATIONAL, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 1. Interim Financial Information The interim financial data is unaudited; however, in the opinion of Chartwell Partners International, Inc. ("CPI"), the interim data includes all adjustments, consisting only of normal recurring accruals, necessary for a fair statement of the results of the interim periods. The results of operations for the nine months ended September 30, 1997, are not necessarily indicative of the results that can be expected for the entire fiscal year ending December 31, 1997. 35 LAMALIE ASSOCIATES, INC. INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following unaudited pro forma combined financial statements for the year ended February 28, 1997, and the nine months ended November 30, 1997, have been prepared to reflect the financial position of Lamalie Associates, Inc. ("LAI" or "the Company") as if the acquisitions of Chartwell Partners International, Inc. ("CPI") in January 1998, and Ward Howell International, Inc. ("WHI") in February 1998, had occurred effective March 1, 1996. WHI Acquisition The acquisition was treated as a purchase for financial reporting purposes. The Company acquired WHI for approximately $20 million. The purchase consideration consisted of (1) approximately $8.7 million cash, (2) $7.6 million in notes payable over three years, accruing interest on the unpaid balance at the rate of 5.0 percent per annum, and (3) approximately 190,000 shares of the Company's common stock. Approximately $8.7 million of the purchase consideration was derived from the proceeds of the Company's initial public offering which had been invested in short-term investment securities since July 1997. CPI Acquisition The acquisition was treated as a purchase for financial reporting purposes. The Company acquired CPI for approximately $3.1 million. The purchase consideration consisted of (1) approximately $1.4 million cash, (2) a convertible subordinated promissory note of the Company in the principal amount of $1.2 million, payable over three years, accruing interest on the unpaid balance at the rate of 6.75 percent per annum and convertible into shares of the Company's common stock at each anniversary date at the prices specified in the asset purchase agreement, and (3) approximately 26,000 shares of the Company's common stock. Approximately $1.4 million of the purchase consideration was derived from the proceeds of the Company's initial public offering which had been invested in short-term investment securities since July 1997. The Company believes that the assumptions used in preparing the unaudited pro forma combined financial statements contained herein provide a reasonable basis on which to present the unaudited pro forma combined financial data. The unaudited pro forma combined financial statements are provided for informational purposes only and should not be construed to be indicative of the results of operations or financial position of the Company had the transactions occurred on the date indicated and are not intended to project the Company's results of operations or its financial position for any future period or as of any future date. The unaudited pro forma combined financial statements should be read in conjunction with the separate historical financial statements of the Company, CPI and WHI and in conjunction with the related assumptions and notes to these 36 unaudited pro forma combined financial statements. The historical financial statements of CPI and WHI for the year ended December 31, 1996, were used in preparing the unaudited pro forma combined statement of operations for the year ended February 28, 1997. The unaudited pro forma combined financial statements as of and for the nine months ended November 30, 1997, were prepared using the unaudited condensed financial statements of CPI and WHI as of and for the nine months ended September 30, 1997. The unaudited pro forma combined financial statements do not reflect the effect of expected decreases in expenses as a result of cost savings which may be achieved through facilities, technology and administrative integration. Likewise, these statements do not reflect expected increases in levels of expenses as a result of planned upgrades to CPI's and WHI's management information systems. Such items are not reflected because they are not factually determinable or estimable. 37 LAMALIE ASSOCIATES, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF NOVEMBER 30, 1997 (In thousands)
Businesses Acquired --------------------- Acquisition Pro Forma LAI CPI WHI Adjustments Combined -------- -------- -------- ------------ --------- ASSETS Current assets: Cash and cash equivalents $21,739 $ 1,024 $ 1,002 ($9,910) (a),(b) $ 13,855 Accounts receivable, net 14,920 544 8,140 (544) (a) 23,060 Employee advances -- -- 994 (974) (b) 20 Prepaid expenses 1,445 9 44 (9) (a) 1,489 Refundable income taxes 1,419 -- 120 -- 1,539 Deferred tax assets 376 -- 137 -- 513 ------- -------- -------- ------- -------- Total current assets 39,899 1,577 10,437 (11,437) 40,476 Property and equipment, net 4,901 133 957 (964) (a) 5,027 Non-current deferred tax assets 2,949 -- -- (52) (a) 2,897 Goodwill -- -- -- 24,233 (a) 24,233 Other assets 3,878 6 445 (19) (a) 4,310 ------- -------- -------- ------- ------- Total assets $51,627 $ 1,716 $ 11,839 $11,761 $76,943 ======= ======== ======== ======= =======
38 LAMALIE ASSOCIATES, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF NOVEMBER 30, 1997 (In thousands) (Continued)
Businesses Acquired --------------------- Acquisition Pro Forma LAI CPI WHI Adjustments Combined -------- --------- -------- ------------ --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,122 $ 107 $ 617 $ (61) (a) $ 1,785 Accrued compensation 11,740 890 9,017 (890) (a) 20,757 Current maturities of long-term debt 114 20 83 2,864 (a),(b) 3,081 Other current liabilities 192 -- 55 2,500 (a) 2,747 -------- -------- -------- --------- -------- Total current liabilities 13,168 1,017 9,772 4,413 28,370 -------- -------- -------- --------- -------- Accrued rent 1,015 -- 273 (273) (a) 1,015 Long-term debt, less current maturities 140 17 86 5,802 (a),(b) 6,045 Deferred compensation 6,676 -- -- -- 6,676 Deferred taxes -- -- 52 (52) (a) -- -------- -------- -------- --------- -------- Stockholders' equity: Common stock 54 100 2 (100) (a) 56 Additional paid-in capital 29,138 -- 1,181 3,026 (a) 33,345 Subscriptions receivable -- -- (86) 86 (b) -- Retained earnings 1,436 582 559 (1,141) (a) 1,436 -------- -------- -------- --------- -------- Total stockholders' equity 30,628 682 1,656 1,871 34,837 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity $ 51,627 $ 1,716 $ 11,839 $ 11,761 $ 76,943 ======== ======== ======== ========= ========
See Notes to Unaudited Pro Forma Combined Financial Statements. 39 LAMALIE ASSOCIATES, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 28, 1997 (In thousands, except per share data)
Businesses Acquired ------------------- Compensation Pro Forma Acquisition Pro Forma LAI Adjustments LAI CPI WHI Adjustments Combined ------- ------------ --------- ------- -------- ----------- -------- Fee revenue, net $46,437 $ -- $46,437 $ 2,618 $ 25,138 $ -- $74,193 Operating expenses: Compensation and benefits 39,928 (4,575) (c) 35,353 1,896 22,370 (2,341) (d) 57,278 General and administrative expenses 6,685 -- 6,685 547 2,079 -- 9,311 Goodwill amortization -- -- -- -- -- 808 (e) 808 ------- ------- ------- ------- -------- -------- ------- Total operating expenses 46,613 (4,575) 42,038 2,443 24,449 (1,533) 67,397 ------- ------- ------- ------- -------- -------- ------- Operating income (loss) (176) 4,575 4,399 175 689 1,533 6,796 Interest income (expense), net (376) -- (376) 20 31 (901) (f) (1,226) ------- ------- ------- ------- -------- -------- ------- Income (loss) before provision for (552) 4,575 4,023 195 720 632 5,570 income taxes Provision for income taxes 15 1,675 (c) 1,690 6 382 558 (g) 2,636 ------- ------- ------- ------- -------- -------- ------- Net income (loss) $ (567) $ 2,900 $ 2,333 $ 189 $ 338 $ 74 $ 2,934 ======= ======= ======= ======= ======== ======== ======= Net income (loss) per common and common equivalent share $ (0.18) $ 0.73 $ 0.86 ======= ======= ======= Weighted average common and common equivalent shares outstanding 3,199 3,199 3,415 ======= ======= =======
See Notes to Unaudited Pro Forma Combined Financial Statements. 40 LAMALIE ASSOCIATES, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997 (In thousands, except per share data)
Businesses Acquired ----------------------- Acquisition Pro Forma LAI CPI WHI Adjustments Combined ------- -------- ------- ----------- --------- Fee revenue, net $45,847 $ 2,804 $19,394 $ -- $ 68,045 Operating expenses: Compensation and benefits 35,152 2,192 16,958 (2,240) (d) 52,062 General and administrative expenses 5,872 318 2,384 -- 8,574 Goodwill amortization -- -- -- 606 (e) 606 -------- -------- ------- -------- ---------- Total operating expenses 41,024 2,510 19,342 (1,634) 61,242 -------- -------- ------- -------- ---------- Operating income 4,823 294 52 1,634 6,803 Interest income (expense), net 45 18 77 (676) (f) (536) -------- -------- ------- -------- ---------- Income before provision for income taxes 4,868 312 129 958 6,267 Provision for income taxes 2,094 2 58 768 (g) 2,922 -------- -------- ------- -------- ---------- Net income $ 2,774 $ 310 $ 71 $ 190 $ 3,345 ======== ======== ======= ======== ========== Net income per common and common equivalent share $ 0.63 $ 0.72 ======== ========== Weighted average common and common equivalent shares outstanding 4,413 4,629 ======== ==========
See Notes to Unaudited Pro Forma Combined Financial Statements. 41 LAMALIE ASSOCIATES, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (a) To reflect purchase accounting adjustments for allocation of purchase price and to reflect the use of cash, borrowing and issuance of common stock by the Company to finance the transactions. (b) To reflect settlement of WHI employee and related party receivables and payables required as a condition to completing the transaction. (c) To reflect the elimination of that portion of consultant compensation that exceeds the amount which would have been paid to the Company's consultants had the Company's revised compensation plan for consultants, adopted March 1, 1997, been in effect for all of fiscal 1997 and the related increase in provision for income taxes. (d) To reflect the elimination of that portion of consultant compensation that exceeds the amount which would have been paid had the WHI consultants been paid under the Company's revised compensation plan for consultants, adopted March 1, 1997. (e) To reflect the increase in amortization expense related to the goodwill recorded under the purchase method of accounting. The Company amortizes goodwill over 30 years. (f) To reflect the elimination of interest income foregone in connection with the cash used in the acquisitions and the increase in interest expense for the notes payable issued in connection with the acquisitions bearing interest at rates ranging from 5 to 6.75 percent. (g) To reflect the increase in income tax expense based on the pro forma adjustments to income before provision for income taxes based on the Company's effective tax rate after consideration of certain portions of goodwill which are not deductible for income tax purposes. 42 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, Registrant's principal financial officer, thereunto duly authorized. LAMALIE ASSOCIATES, INC. ------------------------ (Registrant) March 13, 1998 /s/ JACK P. WISSMAN ------------------------ Jack P. Wissman Executive Vice President (Authorized officer of Registrant and principal financial officer) EX-2.1 2 WARD HOWELL INT'L ASSET PURCHASE AGREEMENT 1 EXHIBIT 2.1 ================================================================================ ================================================================================ AGREEMENT AND PLAN OF MERGER by and among LAMALIE ASSOCIATES, INC., LAI MERGERSUB, INC. and WARD HOWELL INTERNATIONAL, INC. February 27, 1998 ================================================================================ ================================================================================ 2 TABLE OF CONTENTS 1. DEFINITIONS...........................................................1 (A) CERTAIN TERMS................................................1 (B) GENERAL......................................................4 2. PLAN OF ACQUISITION...................................................4 (A) MERGER.......................................................4 (B) THE CLOSING..................................................5 (C) CERTAIN EFFECTS OF THE MERGER................................5 (D) APPROVAL BY WARD HOWELL STOCKHOLDERS.........................7 3. MERGER CONSIDERATION; MANNER OF CONVERTING SHARES.....................7 (A) MERGER CONSIDERATION.........................................7 (B) ADJUSTMENTS TO MERGER CONSIDERATION..........................8 (C) DISSENTING SHARES...........................................12 (D) ANTI-DILUTION PROVISIONS....................................13 (E) FRACTIONAL SHARES...........................................13 4. PROCEDURE FOR PAYMENT OF MERGER CONSIDERATION........................13 (A) EXCHANGE PROCEDURES.........................................13 (B) RIGHTS OF WARD HOWELL STOCKHOLDERS..........................14 5. REPRESENTATIONS AND WARRANTIES OF WARD HOWELL........................14 (A) ORGANIZATION, STANDING, AND POWER...........................14 (B) AUTHORITY...................................................14 (C) CORPORATE APPROVAL..........................................15 (D) NO CONFLICT.................................................15 (E) CONSENTS REQUIRED...........................................15 (F) CAPITALIZATION..............................................15 (G) NO SUBSIDIARIES.............................................16 (H) FINANCIAL STATEMENTS........................................16 (I) ABSENCE OF CERTAIN CHANGES OR EVENTS........................16 (J) NO UNDISCLOSED LIABILITIES..................................17 (K) TAX MATTERS.................................................17 (L) ASSETS......................................................18 (M) LAKE GENEVA OFFICE..........................................18 (N) CONDUCT OF BUSINESS.........................................18 (O) CLIENT LIST; ENGAGEMENT LETTERS.............................19 (P) ACCOUNTS RECEIVABLE.........................................19 (Q) INSURANCE...................................................20 (R) ENVIRONMENTAL MATTERS.......................................20 (S) COMPLIANCE WITH LAWS; NO VIOLATIONS.........................20 (T) EMPLOYEES...................................................21 (U) LABOR MATTERS...............................................21 (V) EMPLOYEE BENEFIT PLANS......................................21
i 3 (W) COMMITMENTS AND CONTRACTS...................................22 (X) MATERIAL CONTRACT DEFAULTS..................................23 (Y) LEGAL PROCEEDINGS...........................................23 (Z) INTELLECTUAL PROPERTY.......................................23 (AA) BROKERS AND FINDERS.........................................24 (BB) WARD HOWELL STOCKHOLDER MERGER MATERIALS; OTHER INFORMATION.................................................24 (CC) CONDUCT OF BUSINESS BY WARD HOWELL SINCE DATE OF FINANCIAL STATEMENTS........................................24 (DD) FORBEARANCE FROM CERTAIN ACTIONS BY WARD HOWELL SINCE DATE OF FINANCIAL STATEMENTS..........................24 (EE) AFFILIATE TRANSACTIONS......................................26 (FF) WARD HOWELL RUSSIA, INC.....................................26 6. REPRESENTATIONS AND WARRANTIES OF LAI................................26 (A) ORGANIZATION, STANDING, AND POWER...........................26 (B) AUTHORITY...................................................26 (C) CORPORATE APPROVAL..........................................27 (D) NO CONFLICT.................................................27 (E) CONSENTS REQUIRED...........................................28 (F) CAPITALIZATION..............................................28 (G) NO SUBSIDIARIES.............................................28 (H) FINANCIAL STATEMENTS........................................28 (I) ABSENCE OF CERTAIN CHANGES OR EVENTS........................29 (J) NO UNDISCLOSED LIABILITIES..................................29 (K) TAX MATTERS.................................................29 (L) CONDUCT OF BUSINESS.........................................30 (M) COMPLIANCE WITH LAWS; NO VIOLATIONS.........................30 (N) BROKERS AND FINDERS.........................................30 (O) WARD HOWELL STOCKHOLDER MERGER MATERIALS; OTHER INFORMATION.30 (P) EMPLOYEE BENEFIT PLANS......................................31 (Q) MATERIAL CONTRACT DEFAULTS..................................31 (R) LEGAL PROCEEDINGS...........................................31 (S) LABOR MATTERS...............................................32 7. TRANSACTIONS AND OBLIGATIONS OF THE PARTIES..........................32 (A) CONDUCT OF BUSINESS BY WARD HOWELL..........................32 (B) FORBEARANCE FROM CERTAIN ACTIONS BY WARD HOWELL.............32 (C) DISSENTING SHARES...........................................34 (D) CERTAIN COVENANTS OF LAI....................................34 (E) NOTIFICATION OF ADVERSE CHANGES IN CONDITION................35 (F) GOVERNMENT FILINGS AND REPORTS..............................35 (G) HCC MERGER..................................................35 (H) ISSUANCE OF BONUS SHARES....................................35 (I) OWNERSHIP OF WARD HOWELL COMMON STOCK.......................35 (J) DUE DILIGENCE INVESTIGATION; CONFIDENTIALITY................35 (K) AGREEMENTS AS TO EFFORTS TO CONSUMMATE......................36 (L) NO PURSUIT OF COMPETING TRANSACTIONS........................36
ii 4 (M) EMPLOYEE BENEFITS...........................................37 (N) TERMINATION OF STOCKHOLDERS AGREEMENT.......................37 (O) CURRENT INFORMATION.........................................37 (P) OTHER ACTIONS...............................................38 (Q) PRESS RELEASES..............................................38 (R) CORPORATE GOVERNANCE PROVISIONS.............................38 (S) EXTENSION OF EXCLUSIVITY LETTER.............................38 (T) EMPLOYMENT AGREEMENTS.......................................38 (U) LAI POST-CLOSING PAYMENT OBLIGATIONS........................39 (V) CERTAIN AGREEMENTS WITH RESPECT TO LEO......................39 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES...............39 (A) CONDITIONS TO OBLIGATIONS OF EACH PARTY.....................39 (B) CONDITIONS TO OBLIGATIONS OF LAI TO EFFECT THE MERGER.......40 (C) CONDITIONS TO OBLIGATION OF WARD HOWELL TO EFFECT THE MERGER......................................................42 9. INDEMNIFICATION......................................................42 (A) GENERAL - INDEMNIFICATIONS BY WARD HOWELL AND THE WARD HOWELL STOCKHOLDERS ........................................42 (B) GENERAL - INDEMNIFICATIONS BY LAI AND MERGERSUB.............43 (C) CLAIMS FOR INDEMNIFICATION..................................44 (D) RIGHT TO DEFEND.............................................44 (E) COOPERATION.................................................44 (F) LIMITATION..................................................45 (G) OFFSET......................................................45 (H) TERMINATION OF SUBSIDIARY OBLIGATIONS.......................46 10. TERMINATION..........................................................46 (A) TERMINATION.................................................46 (B) EFFECT OF TERMINATION.......................................47 11. MISCELLANEOUS........................................................47 (A) SURVIVAL OF CERTAIN PROVISIONS..............................47 (B) RESOLUTION OF DISPUTES......................................47 (C) EXPENSES....................................................48 (D) ENTIRE AGREEMENT............................................48 (E) AMENDMENT AND MODIFICATION..................................48 (F) WAIVERS.....................................................48 (G) NO ASSIGNMENT...............................................49 (H) NOTICES.....................................................49 (I) CONSTRUCTION AND INTERPRETATION.............................50 (J) ENFORCEMENT OF AGREEMENT....................................50 (K) COUNTERPARTS................................................50
iii 5 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as of February 27, 1998 by and among LAMALIE ASSOCIATES, INC., a Florida corporation ("LAI"), LAI MERGERSUB, a Connecticut corporation and a wholly-owned subsidiary of LAI ("MergerSub"), WARD HOWELL INTERNATIONAL, INC., a Connecticut corporation ("Ward Howell") and those owners of shares of common stock of Ward Howell who have executed and entered into this Agreement by executing a Joinder Agreement as further described below (the "Ward Howell Stockholders"). RECITALS WHEREAS, the respective Boards of Directors of LAI, MergerSub, and Ward Howell and the Ward Howell Stockholders have approved the acquisition of Ward Howell by LAI through the merger of Ward Howell with MergerSub (the "Merger") upon the terms and subject to the conditions set forth herein, and have determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals and in the best interests of their respective stockholders; and WHEREAS, the parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger; and WHEREAS, the parties acknowledge that the transactions contemplated by this Agreement are subject to the satisfaction of certain other conditions described in this Agreement; NOW, THEREFORE, in consideration of the above and the mutual representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. DEFINITIONS. (A) CERTAIN TERMS. Except as otherwise provided herein, the capitalized terms set forth below shall have the following meanings when used in this Agreement: "Affiliate" means, with respect to any person (the "first person"), any other person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the first person. "Consent" means any consent, approval, authorization, clearance, exemption, waiver, ratification or similar affirmation of or by any person. "Effective Time" means the date and time as of which the Merger and the other transactions contemplated by this Agreement shall become effective, as more fully set forth in Section 2(b). "Environmental Law" means (i) any Law that (A) relates to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or 1 6 subsurface strata) and (B) is administered, interpreted or enforced by the United States Environmental Protection Agency or any state or local agency with jurisdiction over pollution or protection of the environment, and (ii) any other Law relating to emissions, discharges, releases or threatened releases of any Hazardous Material or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any Hazardous Material, including the Comprehensive Environmental Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq., and the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles, consistently applied. "Hazardous Material" means (i) any hazardous substance, hazardous material, hazardous waste, regulated substance or toxic substance (including as those terms are defined by any applicable Environmental Law) and (ii) any chemical, pollutant, contaminant, petroleum, petroleum product or oil, and specifically shall include asbestos requiring abatement, removal or encapsulation pursuant to the requirements of Regulatory Authority and any polychlorinated biphenyls ("PCBs"). "Internal Revenue Code" mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Knowledge" means, as of the date relating thereto, (i) as to an individual, actual knowledge after an investigation (including, as appropriate, a review of documents and consultation with counsel) that, under the circumstances (including such person's title, position or status), is reasonably diligent, (ii) as to a person not an individual, the knowledge (as defined in the preceding clause (i)) of such person's Chief Executive Officer and Chief Financial Officer and the knowledge (without any special investigation) of the Executive Committee of such person's Board of Directors (or, as to a person not a corporation, the individuals holding positions of corresponding responsibility) or (iii) in the case of Ward Howell with respect to personnel and employment matters only, the knowledge (as defined in the preceding clause (i)) of the Chief Executive Officer and the Chief Financial Officer and the knowledge (without any special investigation) of the Executive Committee of the Board of Directors or any of the directors. "LAI Common Stock" means the Common Stock, $.01 par value per share, of LAI. "Law" means any code, law, ordinance, regulation, reporting or licensing requirement, rule or statute applicable to a person or to a person's assets, properties, liabilities or business, including those promulgated, interpreted or enforced by any Regulatory Authority, including any judicial or regulatory interpretation of any of the same and including the common law. "LGO" means the office division of Ward Howell located in Lake Geneva, Wisconsin. 2 7 "LGO Accounts Receivable" means any accounts receivable of Ward Howell which are outstanding immediately prior to the Effective Time and which would have been governed by the LGO Agreement if such agreement were not terminated in connection with the Merger (as defined in Section 7(g) hereof). "LGO Agreement" means that certain letter agreement dated as of June 21, 1995 by and among Ward Howell, CSG International, Inc., Michael J. Corey and Patrick Corey. "LGO Stockholders" means Michael J. Corey, Patrick Corey, Paul Hanson and Thomas Moran. "Material Adverse Effect" or "Material Adverse Change" means, as to any person, a material adverse effect or impact on (i) the financial position, business, results of operations or prospects of such person and its Affiliates, taken as a whole, or (ii) the ability of such person or any Affiliate of such person to perform its obligations under this Agreement or to consummate the Merger or the other transactions or actions contemplated by this Agreement. "Nasdaq" means the Nasdaq Stock Market (National Market System). "Non-LGO Accounts Receivable" means any accounts receivable of Ward Howell which are outstanding immediately prior to the Effective Time and are not LGO Accounts Receivable. "Permit" means any permit, license, variance, certificate, authorization, filing, franchise, notice, right, Consent or approval of or from any Regulatory Authority. "Regulation S-X" means Regulation S-X as promulgated and amended from time to time by the SEC. "Regulatory Authority" means, as to any subject matter or person, any court, any governmental, regulatory or administrative agency, any commission, authority or instrumentality or any other public body, domestic or foreign, having jurisdiction over such subject matter or person. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securities Laws" means the Securities Act, the Exchange Act, the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, the Trust Indenture Act of 1939, as amended, and other federal and state securities Laws. "Tax" means any federal, state, local or foreign income, payroll, franchise, property, sales, excise or other tax, tariff, duty, assessment or governmental charge of any nature whatsoever, including any interest, penalty or addition thereon or thereto, imposed, assessed, charged or levied by any Governmental Authority. 3 8 "Tax Return" means any return, report or similar statement (including any schedules, statements or attachments thereto) required to be filed with respect to any Tax, including any information return, claim for refund, amended return or declaration of estimated Tax. "Ward Howell Common Stock" means the Common Stock, $1.00 par value per share, of Ward Howell. (B) GENERAL. (i) Inclusive Statements. Whenever any of the words "include," "includes" or "including" is used in this Agreement, such word shall be construed to indicate explanation, clarification and/or the presentation of one or more examples, and not with limitation. (ii) Number. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. (iii) Person. Unless the context clearly indicates otherwise, the term "person" includes an individual or natural person and also any entity or artificial person, including any corporation, partnership, joint venture, trust or other incorporated or unincorporated association or organization. 2. PLAN OF ACQUISITION. (A) MERGER. (i) General. At the Effective Time, MergerSub shall be merged (the "Merger") with and into Ward Howell, with Ward Howell being the surviving corporation and thereby becoming a wholly-owned subsidiary of LAI (Ward Howell as it exists after the Effective Time being sometimes referred to in this Agreement as the "Surviving Corporation"). (ii) Conversion of and Consideration for Ward Howell Common Stock. At the Effective Time, subject to the terms and conditions of this Agreement, each of those shares of Ward Howell Common Stock (other than Dissenting Shares (as defined below)) that are issued and outstanding immediately prior to the Effective Time ("Surrendered Ward Howell Shares") shall, by virtue of the Merger, automatically and without any action on the part of the holder thereof, be converted into and represent the right to receive, upon surrender of the certificate representing such share, that percentage of the aggregate Merger Consideration equal to the percentage of all shares of Ward Howell Common Stock issued and outstanding immediately prior to the Effective Time (including Dissenting Shares) represented by such share. Shares of Ward Howell Common Stock, if any, held by Ward Howell as treasury stock shall for the purposes of this Agreement be deemed issued but not outstanding, and no Merger Consideration shall be payable with respect to any such shares. (iii) Effective Time. The Merger and the other transactions contemplated by this Agreement shall become effective at and as of the Effective Time, which shall be the date and time as of which the Merger is effective under and in accordance with the Connecticut Business 4 9 Corporation Act and other general corporate Laws of the State of Connecticut ("Connecticut Corporate Law"), as reflected in the official records of the Secretary of the State of Connecticut after the filing, on or as of the Closing Date (as hereinafter defined), by or on behalf of each of Ward Howell and MergerSub, of the Certificate of Merger (as hereinafter defined) with respect to the Merger with the Secretary of State of the State of Connecticut, or such other date and time as may be determined by LAI and Ward Howell and not inconsistent with Connecticut Corporate Law. (iv) Connecticut Corporate Law. The Merger shall be effectuated under and in accordance with the Connecticut Corporate Law by the filing with the Secretary of State of the State of Connecticut of a Certificate of Merger containing the provisions required by, and executed in accordance with, Connecticut Corporate Law and otherwise in substantially the same form as is attached as Exhibit 2(a)(iv) (the "Certificate of Merger") hereto. The Surviving Corporation shall continue to be governed by the Laws of the State of Connecticut. (B) THE CLOSING. (i) Time and Place. Consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York, commencing at 10:00 a.m., local time, on the second business day immediately following the Ward Howell Stockholders' Meeting (as hereinafter defined) and shall proceed promptly to conclusion, or at such other place, time, and date as shall be fixed by mutual agreement of LAI and Ward Howell, but in any event no later than February 28, 1998. The day on which the Closing shall occur is referred to herein as the "Closing Date." All actions taken at the Closing shall be deemed to have been taken simultaneously at the time the last of any such actions is taken or completed. (ii) Actions Taken. At the Closing, (i) Ward Howell and the Ward Howell Stockholders will deliver to LAI and MergerSub the various certificates, instruments, and documents required under this Agreement to be delivered by them, (ii) LAI and MergerSub will deliver to Ward Howell the various certificates, instruments, and documents required under this Agreement to be delivered by them, (iii) MergerSub and Ward Howell will cause to be prepared, executed and delivered the Certificate of Merger and the same to be filed with the Secretary of State of the State of Connecticut effective as of the Closing, (iv) the parties will cause to be prepared, executed and delivered any and all other appropriate and customary documents as any party hereto or its counsel may reasonably request for the purpose of consummating the transactions contemplated by this Agreement, and (v) LAI will cause the Merger Consideration to be delivered to the Ward Howell Stockholders in the manner provided below. (C) CERTAIN EFFECTS OF THE MERGER. (i) General. The Merger shall have the effects provided for under Connecticut Corporate Law and, subject thereto, this Agreement and the Certificate of Merger. (ii) Continuation of Existence. Except as may otherwise be set forth herein, (a) the corporate existence and identity of Ward Howell, with all its purposes, powers, franchises, privileges, rights and immunities, shall continue unaffected and unimpaired by the Merger, and (b) 5 10 the corporate existence and identity of MergerSub, with all its purposes, powers, franchises, privileges, rights and immunities, at the Effective Time shall be merged with and into that of Ward Howell, and the Surviving Corporation shall be vested fully therewith, and the separate corporate existence and identity of MergerSub shall thereafter cease. The Surviving Corporation may, at any time after the Effective Time, take any action (including executing and delivering any document) in the name and on behalf of either Ward Howell or MergerSub necessary to carry out and effectuate the transactions contemplated by this Agreement. (iii) Corporate Names. From and after the Effective Time, the corporate name of the Surviving Corporation shall be changed to LAI Ward Howell, Inc. Both LAI and the Surviving Corporation shall then begin conducting business under the name "LAI Ward Howell," in addition to any other name under which such business may be conducted. (iv) Certificate of Incorporation. The Certificate of Incorporation of Ward Howell, as in effect at the Effective Time, shall continue in full force and effect and shall be the Certificate of Incorporation of the Surviving Corporation. (v) Bylaws. The Bylaws of Ward Howell, as in effect at the Effective Time, shall continue in full force and effect and shall be the Bylaws of the Surviving Corporation. (vi) Officers and Directors. The officers and directors of MergerSub, in office at the Effective Time, shall continue as the officers and directors of the Surviving Corporation (unless otherwise elected or appointed at or after the Effective Time), each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation. On the Closing Date, the Board of Directors of LAI will be expanded to appoint David Witte to serve as a member until the next annual meeting of LAI's stockholders. LAI shall then use its best efforts to cause David Witte to be elected for a three-year term at its next annual stockholders meeting, and, in that connection, will include Mr. Witte on its slate of nominees and will recommend Mr. Witte to its stockholders at that meeting. If David Witte ceases to serve as a Board member for any reason during that three year term, the LAI Board will elect a former stockholder of Ward Howell to fill his Board position during the remainder of the term. (vii) Cancellation of Ward Howell Common Stock. After the Effective Time, no share of Ward Howell Common Stock shall be deemed to be outstanding or to have any rights other than as specifically set forth in this Agreement or as required under Connecticut Corporate Law. (viii) Conversion of MergerSub Common Stock. At and as of the Effective Time, each issued and outstanding share of common stock of MergerSub shall be converted into one share of common stock of the Surviving Corporation. (ix) Closing of Transfer Records. At the Effective Time, the stock transfer books of Ward Howell shall be closed as to Ward Howell Stockholders immediately prior to the Effective Time and no transfers of Ward Howell Common Stock by any Ward Howell Stockholder shall thereafter be made or recognized. 6 11 (D) APPROVAL BY WARD HOWELL STOCKHOLDERS. This Agreement and the Merger have been approved by vote of the Ward Howell Stockholders at a meeting of the Ward Howell Stockholders duly called and held immediately prior to the execution of this Agreement (the "Stockholders' Meeting," as more fully described below), and the parties hereto have cooperated in the preparation of materials with which to solicit such approval by the Ward Howell Stockholders (the "Ward Howell Stockholder Merger Materials," as more fully described below). 3. MERGER CONSIDERATION; MANNER OF CONVERTING SHARES. (A) MERGER CONSIDERATION. The Merger Consideration, subject to adjustment as set forth below, shall consist of: (i) Cash Consideration. $8,762,000 in cash (the "Cash Consideration"); (ii) LAI Notes. $7,962,000 in original principal amount promissory notes of LAI, each in substantially the same form as set forth as Exhibit 3(a)(ii) hereto (the "LAI Notes"), each of which shall bear interest at the rate of 5% per annum and be payable in three equal annual payments; and (iii) LAI Stock. 200,000 shares of LAI Common Stock (the "LAI Stock"). (iv) Allocation among Ward Howell Stockholders. A Ward Howell Stockholder who is entitled to receive pursuant to this Agreement a percentage of the Merger Consideration shall be entitled to receive (1) that same percentage of the Cash Consideration, (2) that same percentage of the aggregate original principal amount of LAI Notes, reflected in a single LAI Note payable to such Ward Howell Stockholder, and (3) that same percentage of the aggregate number of shares of LAI Common Stock included in the Merger Consideration, reflected in a single stock certificate (subject to adjustments for fractional shares pursuant to Section 3(e)). (v) Payment of Withholding Taxes. An amount equal to the aggregate amount of taxes required to be withheld by Ward Howell as set forth on Exhibit 3(a)(v) in connection with the issuance of the Bonus Shares (as hereinafter defined) will be withheld at Closing from the Cash Consideration portion of the Merger Consideration payable to the Ward Howell Stockholders with respect to whom there exists a withholding obligation as set forth on Exhibit 3(a)(v). (vi) No Securities Law Registration. Neither the LAI Notes nor the LAI Stock will be registered under the Securities Act or under any state Securities Laws, because it is believed that their issuance in connection with the Merger will qualify for applicable exemptions from the securities registration requirements of such laws. Accordingly, a legend substantially to the following effect will be placed on each LAI Note and on each certificate evidencing the LAI Stock: "THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES ACT OF ANY STATE. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND SUCH STATE LAWS AS 7 12 MAY BE APPLICABLE, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED." (B) ADJUSTMENTS TO MERGER CONSIDERATION. (i) Adjusted Pro Forma EBIT Shortfall. (1) General. The aggregate amount of Merger Consideration shall be reduced by $8 for each $1 of Ward Howell's Adjusted Pro Forma EBIT Shortfall for the year ending December 31, 1997. "Ward Howell's Adjusted Pro Forma EBIT Shortfall for the year ending December 31, 1997" means the amount, if any, by which $2.5 million exceeds the greater of (A) Ward Howell's actual Adjusted Pro Forma EBIT for the year ending December 31, 1997 or (B) $2.2 million. Ward Howell's Adjusted Pro Forma EBIT Shortfall for the year ending December 31, 1997 may not be more than $300,000 nor less than $0. (2) Adjusted Pro Forma EBIT. Adjusted Pro Forma EBIT for the year ending December 31, 1997 means: (A) Pro Forma EBIT. Earnings before interest and taxes for the year ending December 31, 1997, determined by reference to an audited statement of earnings of Ward Howell for such period to be prepared and presented in accordance with GAAP by Ward Howell and reviewed by Arthur Andersen LLP, LAI's accounting firm, prior to the Closing; plus (B) Excess Profit Distribution. An amount, consistent with past practices, with respect to any excess profit distribution expensed by Ward Howell in respect of its operations for the year ending December 31, 1997, mutually agreed to by the parties prior to the Closing, which amount Ward Howell has estimated to be approximately $1.6 million; (C) LGO Fee Revenue. An amount equal to 19.1 percent (19.1%) of the fee revenues from Ward Howell's Lake Geneva, Wisconsin office for the year ending December 31, 1997, determined in accordance with GAAP; plus (D) Compensation System Adjustment. An amount equal to $191,000, which represents the effect of certain differences between the compensation systems of Ward Howell and LAI for the year ending December 31, 1997; plus (E) Transaction Expenses. The actual amount of those direct expenses of Ward Howell in effecting the Merger described on Exhibit 3(b)(ii)(A) hereto ("Ward Howell Transaction Expenses"), that otherwise would reduce Ward Howell's Pro Forma EBIT for the year ending December 31, 1997; plus (F) Pre-Closing Transactions Charges. The actual amount of compensation expense charged by Ward Howell in connection with the issuance of the Bonus Shares (as hereinafter defined) that would otherwise reduce Ward Howell's Pro Forma EBIT for the year ending December 31, 1997. 8 13 (ii) Other Adjustments to Merger Consideration. The aggregate amount of Merger Consideration shall be reduced by: (A) Ward Howell's Excess Transaction Expenses. The amount, if any, by which the aggregate amount of Ward Howell Transaction Expenses exceeds $500,000; and further reduced by (B) Uncollectible Accounts Receivable. 1) Non-LGO Accounts Receivable a) Stockholders. The amount of Merger Consideration payable to a Ward Howell Stockholder responsible for generating Non-LGO Accounts Receivable (each, an "Originating Stockholder") shall be reduced by the amount calculated as set forth below if any Non-LGO Accounts Receivable generated by such Originating Stockholder has not been collected in full on or prior to that date which is 180 days after the Closing Date. LAI shall attempt to collect all Non-LGO Accounts Receivable in accordance with LAI's normal and customary practices. Exhibit 3(b)(ii)(B) sets forth an allocation of Ward Howell's allowance for doubtful accounts among the Ward Howell Stockholders and other originators ("Non-Stockholder Originators"). No adjustment to the Merger Consideration payable to any Originating Stockholder pursuant to this Section 3(b)(ii)(B)1) will be made unless: (i) the aggregate amount of uncollected Non-LGO Accounts Receivable exceeds the sum of (x) the aggregate amount of the allowance for doubtful Non-LGO Accounts Receivable as of the Closing Date, plus (y) the aggregate accrued compensation expense relating to the uncollected Non-LGO Accounts Receivables (the amount of such excess minus the amount of the Excess Non-Stockholder Allowance (as hereinafter defined) is referred to herein as the "Aggregate Reduction Amount"); and (ii) the aggregate amount of uncollected Non-LGO Accounts Receivable of an Originating Stockholder exceeds the sum of (a) the allowance for doubtful accounts allocated to such Originating Stockholder on Exhibit 3(b)(ii)(B) plus (b) the accrued compensation expense relating to such uncollected Non-LGO Accounts Receivable (the amount of such excess is referred to herein as the "Originating Stockholder's Excess Amount"). In such an event, the Merger Consideration payable to each Originating Stockholder to whom an Originating Stockholder's Excess Amount is attributable shall be reduced by such Originating Stockholder's "Pro Rata Reduction Amount." An Originating Stockholder's Pro Rata Reduction Amount shall equal the product obtained by multiplying the Aggregate Reduction Amount by a fraction, the numerator of which is the Originating Stockholder's Excess Amount and the denominator of which is the sum of all Originating Stockholder's Excess Amounts. b) Non-Stockholder Originators. The amount of Merger Consideration payable to the Ward Howell Stockholders (other than the LGO Stockholders) shall be reduced by the amount calculated as set forth below if any Non-LGO Accounts Receivable which are generated by Non-Stockholder Originators have not been collected in full on or prior to that date which is 180 days after the Closing Date. If: (i) the aggregate amount of uncollected Non-LGO Accounts Receivable exceeds the sum of (x) the aggregate amount of the allowance for doubtful Non-LGO Accounts Receivable as of the Closing Date, plus (y) the aggregate accrued compensation expense relating to the uncollected Non-LGO Accounts Receivable; (ii) the aggregate amount of uncollected Non-LGO Accounts Receivable of Non-Stockholder Originators exceeds the 9 14 sum of (a) the allowance for doubtful accounts allocated to the Non-Stockholder Originators on Exhibit 3(b)(ii)(B) plus (b) the aggregate accrued compensation expense relating to such uncollected Non-LGO Accounts Receivable (the amount of such excess is referred to herein as the "Non-Stockholders' Excess Amount"); and (iii) the Non-Stockholders' Excess Amount exceeds the Excess Ward Howell Stockholder Allowance (as hereinafter defined); then the Merger Consideration payable to the Ward Howell Stockholders (other than the LGO Stockholders) shall be reduced by an aggregate amount equal to the Ward Howell Excess Amount (as hereinafter defined). Any such reduction shall be made among the Ward Howell Stockholders (other than the LGO Stockholders) on a pro rata basis in proportion to the amount of Merger Consideration received by such stockholders. c) Certain Definitions. For purposes hereof: (i) the term "Ward Howell Excess Amount" shall mean the amount by which the Non-Stockholders' Excess Amount exceeds the sum of (A) the aggregate allowance for doubtful accounts allocated to Non-Stockholder Originators, plus (B) the aggregate accrued compensation expense relating to the uncollected Non-LGO Accounts Receivable generated by the Non-Stockholder Originators, plus (C) the Excess Ward Howell Stockholder Allowance; (ii) the term "Excess Ward Howell Stockholder Allowance" shall mean the remainder obtained by subtracting (x) the aggregate amount of uncollected Non-LGO Accounts Receivable of all Originating Stockholders from (y) the sum of (A) the allowance for doubtful accounts allocated to all Originating Stockholders plus (B) the accrued compensation expense relating to such uncollected Non-LGO Accounts Receivable; and (iii) the term "Excess Non-Stockholder Allowance" shall mean the remainder obtained by subtracting (A) the aggregate amount of uncollected Non-LGO Accounts Receivable of all Non-Stockholder Originators from (B) the sum of (1) the allowance for doubtful accounts allocated to all Non-Stockholder Originators plus (2) the accrued compensation expense relating to such uncollected Non-LGO Accounts Receivable. 2) LGO Accounts Receivable. The Merger Consideration payable to Michael J. Corey shall be reduced by an amount equal to 4% of the aggregate amount by which the uncollected LGO Accounts Receivable (determined as of that date which is 180 days after the Closing Date) exceeds the allowance for doubtful LGO Accounts Receivable as of the Closing Date. LAI shall attempt to collect all LGO Accounts Receivable in accordance with LAI's normal and customary practices. 3) Use of Excess Allowance. If, as of the date which is 180 days after the Closing Date (i) (a) the sum of the allowance for doubtful LGO Accounts Receivable plus the accrued compensation expense relating to uncollected LGO Accounts Receivable exceeds the amount of uncollected LGO Accounts Receivable (the amount of such excess is referred to hereinafter as the "Excess LGO Allowance"), or (b) the allowance for doubtful Non-LGO Accounts Receivable exceeds the amount of uncollected Non-LGO Accounts Receivable, and (ii) the sum of the aggregate allowance for one such category of accounts receivable plus accrued compensation expense related to the uncollected accounts receivable of such category is less than the aggregate amount of such accounts receivable which are uncollected, then the excess allowance with respect to the other category of accounts receivable shall be added to the allowance with respect to the category of accounts receivable for which a shortfall exists for purposes of the 10 15 calculations set forth in Sections 3(b)(ii)(B)(1), (2) and (3) hereof. The Excess LGO Allowance shall be applied first to increase the allowance for doubtful accounts allocated to the Non-Stockholder Originators to the extent necessary to eliminate any Non-Stockholders' Excess Amount and thereafter an equal portion of the remaining Excess LGO Allowance shall be applied to increase the allowance for doubtful accounts allocated to each Originating Stockholder to whom an Originating Stockholder's Excess Amount is attributable. 4) Assignment of Uncollectible Accounts Receivable. After any reduction in Merger Consideration is effected pursuant to this Section 3(b)(ii)(B), the uncollected portion of any accounts receivable will be assigned on a pro rata basis to the Ward Howell Stockholder(s) whose Merger Consideration was reduced in connection therewith in accordance with this Section 3(b)(ii)(B). Following this assignment, LAI shall continue to attempt to collect such accounts receivable in accordance with LAI's normal and customary practices; and further reduced by (C) Costs to Obtain Certain Consents. The cost of obtaining any consents required in order for LAI to satisfy its obligations to provide financial information regarding the Merger pursuant to Item 7 of SEC Current Report on Form 8-K and Regulation S-X. (D) Retired Partners. An amount equal to that portion of any Merger Consideration which otherwise would have been allocated to a Retiree Stockholder (as hereinafter defined) in respect of the Bonus Shares that would have been issued to the Retiree Stockholder if there had been no retirement.. (iii) Procedures for Determining Adjustment Amounts (1) ADJUSTMENTS TO CASH CONSIDERATION, LAI STOCK AND PRINCIPAL AMOUNTS OF LAI NOTES. Any adjustment to the aggregate amount of the Merger Consideration made pursuant to this Section 3(b) shall be reflected (A) if made at or prior to the Closing, by adjusting on a pro rata basis the aggregate Cash Consideration, the aggregate number of shares of LAI Stock (valued for this purpose at the average of the closing price of LAI Common Stock as reported by the Nasdaq Stock Market (National Market System) for the five trading days ending two days before the Closing Date (the "Fair Market Value")) and the aggregate original principal amount of the LAI Notes, or (B) if made after the Closing, by adjusting the aggregate original principal amount of the LAI Notes. (2) PRE-CLOSING DETERMINATIONS. At or prior to the Closing, the parties shall enter into a written agreement (the "Preliminary Pricing Agreement") (A) referring to each of the adjustment items described in Sections 3(b)(i) and 3(b)(ii) and setting forth, as to each such item, a dollar amount that is identified as either a preliminary estimate or a final binding statement of the amount of such item (provided that each of the dollar amounts set forth in the Preliminary Pricing Agreement referring to adjustment items described in Section 3(b)(i) shall be a final binding statement of the amount of such items), and (B) setting forth the corresponding preliminary adjustments to be made to and a preliminary determination of the Merger Consideration. Subject to the other provisions of this Agreement, the parties shall then proceed with the Closing as if the 11 16 actual final Merger Consideration were the amount preliminarily determined under the Preliminary Pricing Agreement. (3) POST-CLOSING DETERMINATIONS. As promptly as practicable after the Closing, the parties shall enter into one or more written agreements (the "Final Pricing Agreements") (A) collectively referring to each of the adjustment items described in Section 3(b)(ii) not finally agreed to pursuant to the Preliminary Pricing Agreement and setting forth, as to each such item, a dollar amount identified as the final binding statement of the amount of such item, and (B) setting forth the corresponding adjustments to be made to the Merger Consideration. Subject to the other provisions of this Agreement, the Merger Consideration shall then be adjusted as provided above. (4) RESOLUTION OF PRICING DISPUTES. At any time on or after the date thirty (30) days after the Effective Time, (but, as to wholly or partially uncollectible account receivable of Ward Howell referred to in Section 3(b)(ii)(D), not before the date 210 days after the Closing Date), any party to this Agreement may assert the existence of a dispute as to the determination of the amount of any adjustment item described in Section 3(b)(ii) not then already finally agreed to pursuant to the Preliminary Pricing Agreement or a Final Pricing Agreement, and such party may thereupon submit such dispute and the determination of such amount to binding arbitration in accordance with the provisions of Section 12(b). (5) REDUCTIONS IN MERGER CONSIDERATION. The Merger Consideration payable to the LGO Stockholders shall not be reduced pursuant to Section 3(b) except as expressly set forth in Section 3(b)(ii)(B)2). (iv) Risk of Market Fluctuations; No Other Adjustments. Ward Howell and the Ward Howell Stockholders understand that the LAI Common Stock is publicly traded on Nasdaq and that the market price of such stock may increase or decrease from time to time. Ward Howell and the Ward Howell Stockholders acknowledge that the number of shares of LAI Stock to be received by the Ward Howell Stockholders as part of the Merger Consideration pursuant to the consummation of the Merger has been fixed at the time of execution of this Agreement, is subject to adjustment only as specifically provided in this Agreement, and that no other adjustments to the number of shares of LAI Common Stock to be received by the Ward Howell Stockholders as part of the Merger Consideration will be made as a result of market fluctuations or otherwise. (C) DISSENTING SHARES. Notwithstanding anything in this Agreement to the contrary, and except as provided in this paragraph, each Dissenting Share (as hereinafter defined) shall not be converted into or be exchangeable for the right to receive any portion of the Merger Consideration, but instead shall be converted into the right to receive payment with respect thereto in accordance with the provisions of Sections 33-855 through 33-872 of the Connecticut Business Corporation Act (the "Connecticut Dissenters' Rights Law"); provided, however, that if, at any time after the Effective Time, the owner of record of such Dissenting Share (a "Dissenting Stockholder"), without having received any payment under or pursuant to the Connecticut Dissenters' Rights Law, shall have failed to perfect or shall have effectively withdrawn or lost such person's right to obtain payment of the fair value of such Dissenting Share under Connecticut Dissenters' Rights Law, then such Dissenting Share shall be treated as if it were not a Dissenting Share and as if it had been converted at the Effective Time into the right to receive the applicable percentage of the Merger 12 17 Consideration, but with no interest thereon except as provided for under the LAI Notes. "Dissenting Share" means a share of Ward Howell Common Stock, issued and outstanding immediately prior to the Effective Time, owned of record by a person who has not voted such share in favor of the Merger and who has delivered, within the time and in the manner provided by Connecticut Dissenters' Rights Law, a written demand for payment of the fair value of such share in accordance with the Connecticut Dissenters' Rights Law and other applicable provisions of Connecticut Corporate Law. Each Dissenting Stockholder that becomes entitled, pursuant to the Connecticut Dissenters' Rights Law, to payment for any Dissenting Shares shall receive payment therefor from LAI (but only after the amount thereof shall have been agreed upon or at the times and in the amounts required by the Connecticut Dissenters' Rights Law) and all of the Dissenting Shares shall be canceled. Ward Howell shall not, except with the prior written consent of LAI, voluntarily make any payment with respect to, or settle or offer to settle, any demand for payment for or with respect to any Dissenting Shares (or shares that would be Dissenting Shares but for the Effective Time then not yet having occurred). (D) ANTI-DILUTION PROVISIONS. In the event that LAI changes the number of shares of LAI Common Stock issued and outstanding after the date of this Agreement but prior to the Effective Time as a result of a stock split, stock dividend, recapitalization, reclassification or other similar transaction and the record or effective date thereof shall be prior to the Effective Time, the number of shares (and, if appropriate) classification of the shares of capital stock of LAI included in the Merger Consideration shall be correspondingly adjusted so as to prevent any dilutive effect to the holders of Ward Howell Common Stock issued and outstanding immediately prior to the Effective Time. (E) FRACTIONAL SHARES. Notwithstanding any other provision of this Agreement, each Ward Howell Stockholder who would otherwise have been entitled to receive a fraction of a share of LAI Common Stock pursuant to the Merger (after taking into account all certificates delivered by such Ward Howell Stockholder) shall instead be entitled to receive, in lieu thereof, cash (without any interest thereon) in an amount equal to such fraction multiplied by the Fair Market Value of LAI Common Stock; and, no person will be entitled to dividends, voting rights or any other rights with respect to any such fractional share of LAI Common Stock except as provided in this paragraph. 4. PROCEDURE FOR PAYMENT OF MERGER CONSIDERATION. (A) EXCHANGE PROCEDURES. At Closing immediately after the Effective Time, each Ward Howell Stockholder as of the Effective Time (other than Dissenting Stockholders) shall surrender the certificate or certificates representing the shares of Ward Howell Common Stock owned by such person, duly endorsed, to LAI, and shall receive in exchange therefor such person's pro rata share of the Merger Consideration. The Ward Howell Common Stock certificates so surrendered shall forthwith be canceled. LAI shall not be obligated to deliver the Merger Consideration to any Ward Howell Stockholder until such Ward Howell Stockholder surrenders such stockholder's certificate or certificates representing shares of Ward Howell Common Stock for exchange as provided herein. No certificate for LAI Stock, no LAI Note and no check representing the Cash Consideration or cash in lieu of fractional shares and/or declared but unpaid dividends or distributions shall be issued in a name other than that in which the certificate surrendered for exchange is issued. 13 18 (B) RIGHTS OF WARD HOWELL STOCKHOLDERS. Until surrendered for exchange in accordance with this Agreement, each certificate representing shares of Ward Howell Common Stock (other than Dissenting Shares) shall from and after the Effective Time represent for all purposes only the right to receive a pro rata share of the Merger Consideration as set forth in this Agreement (without any interest thereon). Whenever a dividend or other distribution is declared by LAI on LAI Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares issuable pursuant to this Agreement, but no dividend or other distribution payable to the holders of record of LAI Common Stock at or subsequent to the Effective Time shall be delivered to the holder of any certificate representing shares of Ward Howell Common Stock issued and outstanding at the Effective Time until such holder physically surrenders such certificate for exchange as provided in this Agreement, promptly after which time all such dividends or distributions shall be paid (without any interest thereon). 5. REPRESENTATIONS AND WARRANTIES OF WARD HOWELL. Ward Howell and each Ward Howell Stockholder does hereby represent and warrant to LAI and MergerSub as follows: (A) ORGANIZATION, STANDING, AND POWER. Ward Howell is a corporation duly organized, validly existing, and in good standing under the laws of the State of Connecticut, and has the requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted. Ward Howell is qualified or licensed to do business as a foreign corporation in each other jurisdiction in which Ward Howell is required to be so qualified or licensed, except to the extent that the failure to be so qualified or licensed would not have a Material Adverse Effect on Ward Howell. Ward Howell has provided to LAI true, complete, and correct copies of the Certificate of Incorporation and Bylaws of Ward Howell, in each case as in effect on the date of this Agreement. (B) AUTHORITY. Ward Howell has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement and consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement by Ward Howell and the consummation by Ward Howell of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Ward Howell. The affirmative vote of the holders of two-thirds of the outstanding shares of Ward Howell Common Stock is the only vote required of Ward Howell's capital stock necessary in connection with the consummation of the Merger or the other transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Ward Howell and, assuming due authorization, execution and delivery by LAI and MergerSub, constitutes a legal, valid and binding obligation of Ward Howell enforceable against Ward Howell in accordance with its terms (except in all cases to the extent such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors' rights and remedies generally and except that the availability of the equitable remedy of specific performance and injunctive relief is subject to the discretion of the court before which any proceedings may be brought). 14 19 (C) CORPORATE APPROVAL. At a meeting duly called and held, the Board of Directors of Ward Howell has (i) approved and adopted this Agreement and the transactions contemplated hereby, and (ii) recommended approval and adoption of this Agreement to the Ward Howell Stockholders. Further, at a meeting duly called and held, the Ward Howell Stockholders have approved and adopted this Agreement and the transactions contemplated thereby. (D) NO CONFLICT. Neither the execution and delivery of this Agreement by Ward Howell, nor the consummation by Ward Howell of the transactions contemplated hereby, nor compliance by Ward Howell with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the Certificate of Incorporation or Bylaws of Ward Howell, (ii) violate, conflict with or constitute or result in a breach of any term, condition or provision of, or constitute a default (with or without notice or the lapse of time, or both) under, or give rise to any right of termination, cancellation or acceleration of any obligation or the loss of a benefit under, or, except as set forth on Exhibit 5(d) hereto, require a Consent pursuant to, or result in the creation of any claim, lien, pledge, security interest, charge or other encumbrance of any kind whatsoever ("Lien") upon any assets or properties of Ward Howell pursuant to any of the terms, provisions or conditions of any loan or credit agreement, note, bond, mortgage, indenture, deed of trust, license, agreement, contract, lease, Permit, concession, franchise, plan or other instrument or obligation to which Ward Howell is a party, or by which any of its assets or properties may be bound or affected, except for such violations, conflicts, breaches, defaults, creation of Liens or failure to obtain such a Consent that would not, individually or in the aggregate, have a Material Adverse Effect on Ward Howell or the Surviving Corporation or materially threaten, impede or impair the consummation of the transactions contemplated by this Agreement, or (iii) subject to receipt of the requisite approvals and Consents referred to in this Agreement, conflict with or violate any judgment, order, writ, injunction, decree or Law applicable to Ward Howell or any of its assets or properties, which conflict or violation, individually or in the aggregate, would have a Material Adverse Effect on Ward Howell. (E) CONSENTS REQUIRED. Other than as listed on Exhibit 5(e) hereto, no notice to, registration, declaration or filing with, order, authorization or Permit of, exemption or waiver by, Consent of or any action by any Regulatory Authority is necessary or required as a condition to the execution and delivery of this Agreement by Ward Howell or the consummation by Ward Howell of the Merger and the other transactions contemplated hereby, other than such notices, registrations, declarations or filings which, if not made or obtained, would not have, individually or in the aggregate, a Material Adverse Effect on Ward Howell or the Surviving Corporation. (F) CAPITALIZATION. (i) General. The authorized capital stock of Ward Howell consists of 10,000 shares of Ward Howell Common Stock, $1.00 par value per share, of which 4481.1604 shares are issued and outstanding and owned of record by the Ward Howell Stockholders as reflected on Exhibit 5(f) hereto. Ward Howell does not hold any shares of Ward Howell Common Stock as treasury stock. All of the issued and outstanding shares of Ward Howell Common Stock are duly and validly issued, fully paid and nonassessable. No preemptive rights exist or have at any time existed with respect to the Ward Howell Common Stock, and none of the outstanding shares of Ward Howell Common Stock has been issued in violation of any preemptive rights. No shares of Ward 15 20 Howell Common Stock are issuable pursuant to any options, warrants or other outstanding rights to purchase shares of Ward Howell Common Stock. (ii) No Other Securities Outstanding. Except as set forth in the preceding paragraph, there are no shares of capital stock or other voting or equity securities of Ward Howell outstanding and Ward Howell has not granted and there are not outstanding any options, warrants, scrip, rights to subscribe to or acquire, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of Ward Howell or any contracts, commitments, undertakings or other arrangements of any kind to which Ward Howell is a party or by which Ward Howell may be bound to issue, deliver or sell additional shares of its capital stock or other voting securities of Ward Howell, or any options, warrants, scrip or rights to purchase or acquire any additional shares of its capital stock. Except as described on Exhibit 5(f), there are no outstanding obligations of Ward Howell to repurchase, redeem or otherwise acquire any shares of the capital stock of Ward Howell. (iii) Compliance with Law. All shares of capital stock of Ward Howell and all options, warrants, scrip or rights to purchase or acquire any additional shares of Ward Howell capital stock have at all times been offered or issued in accordance with all applicable state and federal securities laws. (G) NO SUBSIDIARIES. Except as set forth on Exhibit 5(g) hereto, Ward Howell does not have any wholly or partially owned subsidiary and does not own any equity or voting interest in any other entity. (H) FINANCIAL STATEMENTS. Exhibit 5(h) sets forth copies of Ward Howell's unaudited financial statements (including related notes and schedules, if any) as of and for the nine months ended September 30, 1996 and September 30, 1997, and copies of its audited financial statements (including related notes and schedules, if any) for each of the four years ended December 31, 1994, 1995, 1996 and 1997 (collectively, the "Ward Howell Financial Statements"). The Ward Howell Financial Statements have been prepared in accordance with GAAP, and all audited Ward Howell Financial Statements are accompanied by the unqualified audit opinion of KPMG Peat Marwick and all related management letters. Each of the Ward Howell Financial Statements, including, in each case, any related notes: (1) is true, complete, and correct in all material respects as of its respective date, (2) is in accordance with and supported by and consistent with the books and records of Ward Howell, including a general ledger and detailed trial balances, which books and records have been made available to LAI and which have been maintained in accordance with good business practices and (3) presents fairly the financial position and the results of operations, changes in stockholders' equity, and statements of cash flows of Ward Howell as of the dates and for the periods indicated. (I) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in Exhibit 5(i) hereto, since December 31, 1997: (i) Ward Howell has conducted its business in all material respects only in the ordinary course and in a manner consistent with past practices, (ii) there have been no events, changes, developments or occurrences that have had, or that would have, individually or in the aggregate, a Material Adverse Effect on Ward Howell, and (iii) Ward Howell has not taken any action, or failed to take any action (whether or not in the ordinary course and consistent with past practices), prior to the date of this Agreement, which action or failure, if taken after the date of this 16 21 Agreement, would represent or result in a material breach or violation of the covenants and agreements of Ward Howell set forth in this Agreement. (J) NO UNDISCLOSED LIABILITIES. Except as disclosed in Exhibit 5(j) hereto, Ward Howell does not have any material obligations or liabilities, and has not incurred or paid any obligation or liability (contingent or otherwise, and whether accrued or reserved), and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such obligation or liability, except obligations and liabilities (i) which are fully accrued or reserved against in the Ward Howell Financial Statements, (ii) obligations to perform services under the engagement letters identified on Exhibit 5(o), or (iii) which were fully incurred or paid after December 31, 1997 in the ordinary course of business consistent with past practices and which in the aggregate will not have a Material Adverse Effect on Ward Howell or the Surviving Corporation. (K) TAX MATTERS. (i) Returns. Except as disclosed in Exhibit 5(k) hereof, all Tax Returns required to be filed by or on behalf of Ward Howell have been timely filed, or requests for extensions have been timely filed, granted and have not expired; all such Tax Returns filed are true, complete and accurate in all material respects; and, all Taxes shown to be due on such Tax Returns have been timely paid by Ward Howell. There is no audit examination, deficiency or refund litigation or matter in controversy in which Ward Howell has been joined as a party with respect to any Taxes, except as reserved against in the Ward Howell Financial Statements or as disclosed in the Exhibits hereto. All Taxes and other liabilities due with respect to completed and settled examinations or concluded litigation have been paid, accrued or provided for. (ii) No Extension or Waiver. Ward Howell has not executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due which extension or waiver is currently in effect. (iii) Provision for Taxes Due. Adequate provision for any Taxes due or to become due for Ward Howell for any period or periods through December 31, 1997 has been made and is reflected on the December 31, 1997 financial statements included in the Ward Howell Financial Statements. (iv) Deferred Taxes. Deferred Taxes of Ward Howell have been provided for in the Ward Howell Financial Statements in accordance with GAAP. (v) Withholding. All Taxes that Ward Howell is required by Law to withhold or to collect for payment have been duly withheld and collected, and have been paid to the proper Regulatory Authority or are held by Ward Howell pending such payment, except for such failures which are not, individually or in the aggregate, material in amount. Ward Howell is in compliance with, and its records contain all information and documents necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code, except for such instances of noncompliance and such 17 22 omissions which would not have, individually or in the aggregate, a Material Adverse Effect on Ward Howell. (vi) No Tax Liens. There are no Liens with respect to Taxes upon any of the material assets or properties of Ward Howell. (vii) Tax Elections. All material elections with respect to Taxes affecting Ward Howell as of the date of this Agreement have been timely made. After the date hereof, no election with respect to Taxes will be made without the prior written consent of LAI, which consent will not be unreasonably withheld. (viii) Stock Sale; No Section 338(h)(10) Election. The parties agree that the Merger shall be treated as a sale of stock for federal income tax purposes. Neither Ward Howell nor the Ward Howell Stockholders shall make an election pursuant to Section 338(h)(10) of the Internal Revenue Code. (L) ASSETS. A true, complete and correct list of all real property owned or leased by Ward Howell is set forth on Exhibit 5(l) hereto. Except as set forth on Exhibit 5(l), Ward Howell has good, valid and marketable title to all of its assets and properties, whether tangible or intangible, real, personal or mixed, free and clear of all Liens, mortgages, conditional and installment sale agreements and secondary interests, of any kind whatsoever, except for Liens for current taxes and assessments not yet due and payable and except for Liens, mortgages, conditional and installment sale agreements and secondary interests which in each case do not involve an unpaid balance of $5,000 or more. All leasehold interests and all fixtures, equipment and other assets and properties that are material or necessary to the business of Ward Howell held under leases or subleases by Ward Howell are held under valid instruments generally enforceable in accordance with their respective terms, and each such instrument is in full force and effect. Substantially all of the equipment and other assets regularly used in the business of Ward Howell is in good and serviceable condition, reasonable wear and tear excepted. (M) LAKE GENEVA OFFICE. The HCC Merger (as hereinafter defined), when consummated prior to the Effective Time of the Merger, will operate to terminate all of the rights and obligations of the parties under that certain Letter Agreement dated June 21, 1995 regarding the Combination of Operations between Ward Howell and CSG International, Inc., Michael J. Corey and Patrick M. Corey (the "LGO Letter Agreement") as of the Effective Time . Without limiting any other representation and warranty herein regarding the assets of Ward Howell, as of the Effective Time all assets associated with the Lake Geneva Office, including without limitation all client lists, customer lists, accounts receivable and the proceeds thereof, will be the sole property of Ward Howell or its wholly-owned subsidiary, free and clear of all Liens, encumbrances or claims of any other party, including without limitation Michael J. Corey, Patrick M. Corey, and Howell-Corey Consulting, Ltd. a Delaware corporation (formerly operating under the assumed name CSG International, Inc.). It shall be specifically understood that all references herein to Ward Howell and to the Ward Howell Stockholders includes the LGO and any Ward Howell Stockholders affiliated with the LGO. 18 23 (N) CONDUCT OF BUSINESS. The business of Ward Howell has been conducted in all material respects in compliance with the AESC Code of Ethics and other standards applicable to executive search firms. (O) CLIENT LIST; ENGAGEMENT LETTERS. Exhibit 5(o) hereto lists all of the existing clients of Ward Howell. True and correct copies of all engagement letters of Ward Howell for searches which are in progress as of the date of this Agreement have been delivered to LAI prior to the execution of this Agreement. True and correct copies of all engagement letters of Ward Howell for searches entered into after the date of this Agreement and prior to the Closing Date will be delivered to LAI prior to the Closing Date. Except as set forth on Exhibit 5(o), each such engagement letter is in full force and effect; all amounts due to date with respect to such engagement letters have been paid; no party is in default thereunder; and there exists no event, occurrence, condition or act which, with the giving of notice, the lapse of time or the happening of any further event or condition would become a default by any party under such agreement. Ward Howell is not in violation of any of the material terms or conditions under any of such engagement letters, all of the material covenants required to have been performed by any party to such engagement letters through the date hereof have been performed in all material respects in accordance with past practices, and all of the material covenants required to be performed as of the Closing Date by any party to such engagement letters will have been performed in all material respects in accordance with past practices. Except as set forth on Exhibit 5(o), all searches have been billed by Ward Howell in accordance with the terms of the engagement letters. Ward Howell will take all reasonable and necessary steps to ensure that a good relationship is maintained with each of its clients between the date of this Agreement and the Effective Date, whether or not listed on Exhibit 5(o) hereto, and will also take all reasonable and necessary steps to encourage its clients to continue doing business with the Surviving Corporation and LAI after the Closing Date. Since December 31, 1997, and except in the ordinary course of business and as in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect on Ward Howell or the Surviving Corporation, there has been no termination, cancellation, limitation, modification or change in Ward Howell's business relationship with any client. (P) ACCOUNTS RECEIVABLE. All accounts receivable of Ward Howell shown on the Ward Howell Financial Statements represent services actually performed in the ordinary course of business in bona fide transactions completed in accordance with the applicable client or customer requirements and any terms and provisions contained in any applicable client contracts or engagement letters and any documents related thereto. The accounts receivable outstanding reflected on the Ward Howell Financial Statements are collectible in full, net of (i) any reserves shown on the December 31, 1997 Ward Howell Financial Statements, plus (ii) accrued compensation expense relating to such accounts receivable reflected on the December 31, 1997 Ward Howell Financial Statements. Exhibit 5(p) hereto details the accrued compensation expense relating to such accounts receivable as of January 31, 1998, including the name of each person to whom such accrued compensation expense relates and the amount payable to such person. Such information will be updated and provided to LAI as of the Closing Date. There are no setoffs, counterclaims or disputes asserted against, and no discounts or allowances from, the accounts receivable other than in amounts which, in the aggregate, are not in excess of the amounts thereof reserved against in the Ward Howell Financial Statements, nor on the Closing Date will there be any such setoffs, counterclaims, 19 24 and disputes asserted against, or discounts or allowances from, the accounts receivable in amounts which, in the aggregate, are in excess of the amounts reserved. (Q) INSURANCE. Set forth on Exhibit 5(q) hereto is a true, complete, and correct list of all insurance policies maintained by Ward Howell, including professional malpractice, life, casualty, fire, general liability, employers' liability, workers' compensation, title, directors' and officers' liability, credit, fidelity, business interruption, errors and omissions and all other forms of insurance, in each case indicating the name of the insurer, and the amount, scope, and coverage of such policies (including the effective dates of the policy, deductibles, and any aggregate limits). All material policies are in full force and effect, and with respect to all policies, all premiums payable with respect to all periods up to and including the date of Closing have been, or will be, fully paid. Ward Howell has not received any notice from any insurance carrier or otherwise that: (i) such insurance will be canceled or terminated or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. Except as disclosed on Exhibit 5(q) hereto, there are no claims pending under such policies of insurance and no notices have been given by Ward Howell under such polices. (R) ENVIRONMENTAL MATTERS. (i) Compliance. Except as disclosed Exhibit 5(r) hereto, to the actual knowledge of Ward Howell's Executive Committee members, Chief Executive Officer and Chief Financial Officer without any duty to investigate, there have been no releases of Hazardous Material in violation of any Environmental Law in, on, under or affecting any current or previously owned or leased real properties of Ward Howell, and Ward Howell has not released into the environment any Hazardous Materials in violation of any Environmental Law in, on, under or affecting any current or previously owned or leased real properties of Ward Howell. (ii) No Proceedings. To the Knowledge of Ward Howell, there is no suit, claim, action or proceeding pending or threatened before any Regulatory Authority or other forum in which Ward Howell has been named as a defendant or a potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any Environmental Law, or (ii) relating to the release into the environment by Ward Howell of any Hazardous Material in violation of applicable Environmental Law, whether or not occurring at, on, under or involving a site owned, leased or operated by Ward Howell. To the Knowledge of Ward Howell, no notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed, and no investigation or review is pending or, to the actual knowledge of Ward Howell's Executive Committee members and Chief Executive Officer and Chief Financial Officer, without any duty to investigate, threatened, by any Regulatory Authority or other person relating to any violation of any Environmental Law by Ward Howell. (iii) Environmental Audits. Ward Howell has not heretofore engaged or retained any person to conduct, and does not have in its possession any document relating to, any environmental audit, assessment or study with respect to any real property currently or previously owned or leased by Ward Howell. 20 25 (S) COMPLIANCE WITH LAWS; NO VIOLATIONS. (i) Permits. Ward Howell has in effect and holds all Permits necessary for it to own, lease, and operate its assets and properties and to carry on its business as now conducted, except in cases where the failure to hold such Permits would not, in the aggregate, have a Material Adverse Effect on Ward Howell. (ii) No Conflict. Except as set forth on Exhibit 5(s)(ii) hereto, Ward Howell is not in conflict with, or in default under or in violation of, (A) its Articles of Incorporation, Bylaws or comparable organizational documents, or (B) any Law, Permit, order, judgment, writ, injunction or decree applicable to its businesses or to its employees conducting such business or by which its assets or properties are bound or affected, except conflicts, defaults or violations which would not have a Material Adverse Effect on Ward Howell. (T) EMPLOYEES. To the Knowledge of Ward Howell, no executive, key employee or group of employees has any plans to terminate employment with Ward Howell. Exhibit 5(t) hereto identifies the parties to, amount and general terms of each Ward Howell Insider Loan. "Ward Howell Insider Loan" means any indebtedness, loan, advance, monetary obligation or credit, or any oral or written arrangement pursuant to which any amount is outstanding, owed, accrued or to be accrued, from Ward Howell to any employee of Ward Howell or any Ward Howell Stockholder, or from any employee of Ward Howell or any Ward Howell Stockholder to Ward Howell. All Ward Howell Insider Loans shall have been paid in full prior to the Effective Time, without the necessity of incurring any other indebtedness. (U) LABOR MATTERS. Ward Howell is not a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with any labor union or labor organization, nor has Ward Howell been joined as a party in any action, suit, claim or proceeding asserting that Ward Howell has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state law) or seeking to compel Ward Howell to bargain with any labor organization as to wages or conditions of employment, nor is there any strike, work stoppage or other labor dispute involving Ward Howell pending or, to the Knowledge of Ward Howell, threatened. To the Knowledge of Ward Howell, there is no activity involving employees of Ward Howell seeking to certify a collective bargaining unit or engaging in any other organizing activity. Except as set forth on Exhibit 5(u) hereto, no material employment related dispute, arbitration, action, suit, claim or proceeding is pending or, to the Knowledge of Ward Howell, threatened. (V) EMPLOYEE BENEFIT PLANS. (i) General. Ward Howell has delivered to LAI, prior to the execution of this Agreement, true, complete and correct copies of, and financial data with respect to, all pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation, bonus or other incentive plans, all other material written employee programs, arrangements or agreements, all medical, vision, dental or other health plans, all life insurance plans and all other material employee benefit plans or fringe benefit plans, including all "employee benefit plans" (as that term is defined in Section 3(3) of ERISA) currently adopted, 21 26 maintained by, sponsored in whole or in part by or contributed to by Ward Howell or any Affiliate thereof for the benefit of Ward Howell's employees, retirees, dependents, spouses, directors, independent contractors or other beneficiaries who are eligible to participate (collectively, the "Ward Howell Benefit Plans"). Any of the Ward Howell Benefit Plans which is an "employee pension benefit plan" (as that term is defined in Section 3(2) of ERISA) is referred to herein as a "Ward Howell ERISA Plan." No Ward Howell Benefit Plan is or has been a multi-employer plan within the meaning of Section 3(37) of ERISA. Ward Howell does not have any ERISA Plans which are a "defined benefit pension plan" (as defined in Section 4140 of the Internal Revenue Code). No Ward Howell Benefit Plan provides death or medical benefits (whether or not insured) to any individual beyond their retirement or other termination of service, other than (i) coverage mandated under applicable Law, including but not limited to the continuation of group health plan coverage requirements of Section 4980B of the Internal Revenue Code and ERISA Section 601 et seq. (ii) death benefits or retirement benefits under any "employee pension plan" (as that term is defined in Section 3(2) of ERISA), or (iii) benefits the full cost of which is borne by current or former employee (or his or her beneficiary). A true, complete, and correct list of all Ward Howell Benefit Plans is set forth on Exhibit 5(v)(i) hereto. (ii) Compliance with Law. All Ward Howell Benefit Plans are and at all times have been in compliance in all material respects with the applicable terms of ERISA, the Internal Revenue Code, and any other applicable Laws, the breach or violation of which would be reasonably likely to have a Material Adverse Effect on Ward Howell or the Surviving Corporation. (iii) No Extraordinary Benefit. Except as disclosed on Exhibit 5(v)(iii) hereto, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (A) result in any payment (including severance or golden parachute payments) becoming due to any director or any employee of Ward Howell from Ward Howell under any Ward Howell Benefit Plan or otherwise, except as may result from the payment of unemployment insurance premiums or similar payments required by applicable Law as a result of the termination of the employment of one or more employees of Ward Howell, (B) increase any benefits otherwise payable under any Ward Howell Benefit Plan, or (C) result in any acceleration of the time of payment or vesting of any such benefits. (iv) Termination of Profit Sharing Plan. Ward Howell will adopt appropriate resolutions of its Board of Directors terminating the Ward Howell International, Inc. Profit Sharing Plan (the "Profit Sharing Plan") and will take all other steps necessary to terminate the Profit Sharing Plan immediately prior to the Effective Time. (W) COMMITMENTS AND CONTRACTS. Except as disclosed on Exhibit 5(w) hereto, Ward Howell is not a party or subject to any of the following (whether written or oral, expressed or implied): (i) any employment, severance, termination, consulting or retirement agreement, contract, arrangement or understanding or other obligation or understanding (including any understandings or obligations with respect to severance or termination pay liabilities or fringe benefits) with any present or former officer, director or employee, (ii) any contract, agreement, arrangement or other instrument containing noncompetition covenants which limits the ability of Ward Howell to compete in any line of business or which involves any restriction of the geographical area in which Ward Howell or any of its affiliates may carry on their business, (iii) any agreement, contract or other 22 27 instrument or commitment relating to the borrowing of money by Ward Howell or the guarantee by Ward Howell of any such obligation, (iv) any agreement, contract, personal property or equipment lease or other document or instrument requiring payments in excess of $25,000 or which cannot be terminated in less than one year without violation of its terms and without cost to Ward Howell, and (v) any other agreement, contract, lease, commitment or other instrument or understanding or amendment thereto as of the date of this Agreement material to the assets, business, conditions or prospects of Ward Howell or not made in the ordinary course of business to which Ward Howell is a party or by which it is bound (all of the foregoing collectively referred to as the "Ward Howell Contracts"). (X) MATERIAL CONTRACT DEFAULTS. Except as set forth on Exhibit 5(x) hereto, Ward Howell is not, and Ward Howell has not received any notice and does not have any Knowledge that any other party is, in default in any material respect under any Ward Howell Contract, except for those defaults which would not have, individually or in the aggregate, a Material Adverse Effect on Ward Howell; and, there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. Each Ward Howell Contract, except as disclosed on Exhibit 5(x) hereto: (i) is in full force and effect, and (ii) Ward Howell has not repudiated or knowingly waived any material provision thereof. All of the indebtedness of Ward Howell for money borrowed may be prepaid at any time by Ward Howell without a penalty or premium. (Y) LEGAL PROCEEDINGS. Except as disclosed on Exhibit 5(y) hereto, there are no actions, suits or proceedings instituted or pending or, to the Knowledge of Ward Howell, threatened against Ward Howell, or against any asset, property, employee benefit plan, interest or right of any of them, that would have, individually or in the aggregate, a Material Adverse Effect on Ward Howell or that would reasonably be expected to materially threaten, impede or impair the consummation of the transactions contemplated by this Agreement. Except as disclosed on Exhibit 5(y) hereto, Ward Howell is not a party to any agreement, contract or other instrument or subject to any restriction under its Articles of Incorporation or Bylaws, or to any other corporate restriction, nor is there any judgment, order, writ, injunction or decree of any Regulatory Authority or arbitrator that would have, individually or in the aggregate, a Material Adverse Effect on Ward Howell or that would reasonably be expected to materially threaten, impede or impair the consummation of the transactions contemplated by this Agreement. Exhibit 5(y) includes a summary report of all actions, suits or proceedings as of the date of this Agreement to which Ward Howell is a party and which names Ward Howell as a defendant or a cross-defendant, and where the estimated maximum exposure is $15,000 or more. (Z) INTELLECTUAL PROPERTY. Ward Howell owns or possesses all material licenses or other rights necessary to use all material software, computer programs, trade secrets, trademarks, trademark rights, copyrights, service marks, service names, trade names, proprietary processes, patents, inventions or similar rights, or applications for any of the foregoing (collectively, the "Intellectual Property"), which are necessary to operate or conduct the business of Ward Howell, free and clear of any Lien and without infringing upon or otherwise acting adversely to the Intellectual Property rights of any other person, except for those Intellectual Property rights as to which the absence of ownership rights or existence of infringement would not, individually or in the aggregate, have or be reasonably likely to have a Material Adverse Effect on Ward Howell. Ward Howell has not received notice claiming that it is infringing upon or otherwise acting adversely to any 23 28 Intellectual Property of any other person. Ward Howell has entered into the License Agreements set forth on Exhibit 5(z) (the "License Agreements") with respect to the service marks "Ward Howell" and "Ward Howell International"; provided, however, that the License Agreements can be terminated without cost to Ward Howell upon one year's written notice, except the License Agreement with Ward Howell International Group, Inc., which can be terminated without cost to Ward Howell upon two year's written notice. The License Agreements are the only agreements pursuant to which Ward Howell has licensed any of its Intellectual Property which exists as of the date hereof or which will exist as of the Closing Date. (AA) BROKERS AND FINDERS. Except for Coopers & Lybrand Securities ("Coopers"), no broker or finder has acted directly or indirectly for Ward Howell in connection with this Agreement or the transactions contemplated hereby. (BB) WARD HOWELL STOCKHOLDER MERGER MATERIALS; OTHER INFORMATION. None of the information supplied or to be supplied by Ward Howell in (i) the Ward Howell Stockholder Merger Materials or (ii) any document to be filed with any Regulatory Authority in connection with the transactions contemplated hereby will, at the respective times such documents are filed and, with respect to the Ward Howell Stockholder Merger Materials, when such materials are delivered to the Ward Howell Stockholders, contain any untrue statement of or be false or misleading with respect to a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which such statements are made, not misleading. All documents that Ward Howell is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form and substance in all material respects with the provisions of applicable Law, including applicable provisions of the Securities Laws. (CC) CONDUCT OF BUSINESS BY WARD HOWELL SINCE DATE OF FINANCIAL STATEMENTS. Since December 31, 1997, except as LAI may have consented to in writing or as otherwise expressly contemplated by this Agreement, Ward Howell has (i) operated its business only in the usual, regular and ordinary course consistent with past practice, (ii) used its reasonable commercial efforts to maintain and preserve intact its business organization, assets and properties and maintain its rights and franchises, (iii) used its reasonable efforts to maintain its current employee, client and other advantageous business relationships and retain the services of its officers and key employees (DD) FORBEARANCE FROM CERTAIN ACTIONS BY WARD HOWELL SINCE DATE OF FINANCIAL STATEMENTS. Since December 31, 1997, and except as LAI may have consented to in writing or as otherwise expressly contemplated by this Agreement, Ward Howell has not: (i) Incurred Additional Indebtedness. (A) Incurred any additional indebtedness or other obligation for borrowed money, (B) assumed, guaranteed, endorsed or otherwise as an accommodation become responsible for the obligations of any person, or (C) imposed, or suffered the imposition, on any material asset or property of Ward Howell of any Lien, or permit any such Lien to exist (other than in connection with deposits, repurchase agreements, bankers acceptances, "treasury tax and loan" accounts established in the ordinary course of business and any Liens in effect as of the date hereof that are disclosed in the Exhibits to this Agreement), or (D) or made any 24 29 loan or advance which would be reasonably likely to have a Material Adverse Effect on Ward Howell or the Surviving Corporation; or (ii) Modified Any Indebtedness. Cancelled, released or assigned any indebtedness to any person or any claims held by any such person, except in the ordinary course of business consistent with past practice or pursuant to contracts, agreements or other instruments in force at the date of this Agreement; or (iii) Issued Securities. Issued, sold, pledged, encumbered, authorized the issuance of, entered into any contract, agreement or other instrument to issue, sell, pledge, encumber or authorize the issuance of, or otherwise permit to become outstanding, any additional shares of Ward Howell Common Stock or any other capital stock of Ward Howell (or permitted the exercise of any option, warrant or other right requiring the issuance of any securities by Ward Howell), or any stock appreciation, option, warrant or conversion or other right to acquire any such stock or any security convertible into any such stock; or (iv) Repurchased Securities, Etc. Repurchased, redeemed or otherwise acquired or exchanged, directly or indirectly, any shares, or any securities convertible into any shares, of Ward Howell Common Stock; or (v) Declared or Paid Dividends. Made, declared or paid any dividend or made any other distribution with respect to shares of Ward Howell Common Stock, whether payable in cash, stock or property, including but not limited to any excess profit distribution; or (vi) Adjusted Capitalization. Except in connection with the Pre-Closing Transactions (as hereinafter defined), adjusted, split, combined or reclassified any capital stock of Ward Howell or authorized the issuance of any other securities with respect to or in substitution for shares of Ward Howell Common Stock; or (vii) Disposition of Assets. Sold, transferred, leased, mortgaged or otherwise disposed of or encumbered any property or asset other than in the ordinary course of business for reasonable and adequate consideration; or (viii) Made Investments. Purchased any securities or made any material investment, either by purchase of stock or securities, contribution to capital, asset transfer or purchase of any assets or property, in any person, or otherwise acquired direct or indirect control over any person, except for transactions in the ordinary course of business consistent with past practice; or (ix) Modified Employment Relationships. Entered into or amended any employment agreement, relationship or similar contract or other instrument, whether written or oral; or (x) Modified Employee Benefits. Adopted any new employee benefit plan or similar arrangement, or made any material change in or to any existing Ward Howell Benefit Plan unless necessary or advisable to maintain the Tax qualified status of any such plan or to accelerate vesting of employer contributions under any profit sharing plans; or 25 30 (xi) Modified Tax or Accounting Procedures. Made any significant change in any Tax or accounting methods or procedures or in any systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws, regulatory accounting requirements or GAAP; or (xii) Entered Into Litigation. Commenced any action, suit, proceeding or litigation, other than in accordance with past practice, or settled any action, suit, proceeding or litigation involving any liability of Ward Howell for material money damages or material restrictions upon the operations of Ward Howell; or (xiii) Modified or Terminated Contracts. Except in the ordinary course of business consistent with past practice, modified, amended or terminated any material contract, agreement or other instrument, other than renewals without material adverse change of terms, or waived, released, compromised or assigned any material rights or claims; or (xiv) Unusual Expenditures. Made any expenditure in excess of $10,000, other than in the ordinary course of business and professional fees payable in connection with the transactions contemplated by this Agreement; or (xv) Agreed to Take Prohibited Action. Agreed to, or made any commitment to, take any of the actions referred to in this Section 5(dd). (EE) AFFILIATE TRANSACTIONS. Other than as set forth on Exhibit 5(ee) hereto, Ward Howell has not entered into any contract or arrangement, whether written or oral, with a Ward Howell Stockholder or other Affiliate of Ward Howell which involves the payment of more than $10,000 by Ward Howell or which cannot be terminated within one year with no cost to Ward Howell. (FF) WARD HOWELL RUSSIA, INC.. Ward Howell has no liability to any third party, including but not limited to any joint ventures partners, with respect to its investment in or involvement with Ward Howell Russia, Inc. or its ownership of the shares of Ward Howell International Holdings, Ltd. (Cyprus). 6. REPRESENTATIONS AND WARRANTIES OF LAI. LAI and MergerSub do hereby represent and warrant to Ward Howell and to the Ward Howell Stockholders as follows: (A) ORGANIZATION, STANDING, AND POWER. LAI is a corporation duly organized, validly existing, and of active status under the laws of the State of Florida, MergerSub is a corporation duly organized, validly existing, and in good standing under the laws of the State of Connecticut, and each has the requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted. LAI is qualified or licensed to do business as a foreign corporation in each other jurisdiction in which LAI is required to be so qualified or licensed. LAI has provided to Ward Howell true, complete, and correct copies of the Articles of Incorporation 26 31 and Bylaws of LAI and the Certificate of Incorporation and Bylaws of MergerSub, in each case as in effect on the date of this Agreement. (B) AUTHORITY. Each of LAI and MergerSub has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement and consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement by LAI and MergerSub and the consummation by LAI and MergerSub of the transactions contemplated hereby, including the issuance of the LAI Stock and the LAI Notes, have been duly and validly authorized by all necessary corporate action in respect thereof. This Agreement has been duly executed and delivered by LAI and MergerSub and (assuming due authorization, execution and delivery by Ward Howell and the Ward Howell Stockholders), constitutes a legal, valid and binding obligation of LAI and MergerSub enforceable against each of them in accordance with its terms (except in all cases to the extent such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors' rights and remedies generally and except that the availability of the equitable remedy of specific performance and injunctive relief is subject to the discretion of the court before which any proceedings may be brought). When the LAI Stock has been issued as provided for in this Agreement and the Certificate of Merger, such shares will be validly issued, fully paid and nonassessable, free and clear of any Liens or other restrictions whatsoever except as contemplated by this Agreement or imposed by applicable Law or by act of the recipient of such shares. When the LAI Notes have been issued as provided for in this Agreement, such promissory notes will be free and clear of any Liens or other restrictions whatsoever except as contemplated by this Agreement or imposed by applicable Law or by act of the recipient of any such promissory note, and each LAI Note will constitute a legal, valid and binding obligation of LAI enforceable against LAI in accordance with its terms (except in all cases to the extent such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors' rights and remedies generally and except that the availability of the equitable remedy of specific performance and injunctive relief is subject to the discretion of the court before which any proceedings may be brought). (C) CORPORATE APPROVAL. At a meeting duly called and held, the respective Boards of Directors of LAI and MergerSub have (A) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of their respective stockholders, and (B) approved and adopted this Agreement and the transactions contemplated hereby. (D) NO CONFLICT. Other than as set forth on Exhibit 6(d), neither the execution and delivery of this Agreement by LAI and MergerSub, nor the consummation by them of the transactions contemplated hereby, nor compliance by them with any of the terms or provisions hereof, will (i) conflict with or violate any provision of their Articles or Certificate of Incorporation or Bylaws, (ii) violate, conflict with or constitute or result in a breach of any term, condition or provision of, or constitute a default (with or without notice or the lapse of time, or both) under, or give rise to any right of termination, cancellation or acceleration of any obligation or the loss of a benefit under, or require a Consent pursuant to, or result in the creation of any Lien upon any assets or properties of LAI or MergerSub pursuant to any of the terms, provisions or conditions of any loan or credit agreement, note, bond, mortgage, indenture, deed of trust, license, agreement, contract, 27 32 lease, Permit, concession, franchise, plan or other instrument or obligation to which either of them is a party, or by which any of their respective assets or properties may be bound or affected, except for such violations, conflicts, breaches, defaults, creation of Liens or failure to obtain such a Consent that would not, individually or in the aggregate, have a Material Adverse Effect on LAI or the Surviving Corporation or materially threaten, impede or impair the consummation of the transactions contemplated by this Agreement, or (iii) subject to receipt of the requisite approvals and Consents referred to in this Agreement, conflict with or violate any judgment, order, writ, injunction, decree or Law applicable to LAI or any of its assets or properties, which conflict or violation, individually or in the aggregate, would have or be reasonably likely to have a Material Adverse Effect on LAI. (E) CONSENTS REQUIRED. Other than as listed on Exhibit 6(e) hereto, no notice to, registration, declaration or filing with, order, authorization or Permit of, exemption or waiver by, Consent of or any action by any Regulatory Authority is necessary or required as a condition to the execution and delivery of this Agreement by LAI and MergerSub or the consummation by them of the Merger and the other transactions contemplated hereby, other than such notices, registrations, declarations or filings which, if not made or obtained, would not have, individually or in the aggregate, a Material Adverse Effect on LAI or the Surviving Corporation. (F) CAPITALIZATION. (i) General. The authorized capital stock of LAI consists of 35,000,000 shares of Common Stock, $.01 par value per share, of which 5,377,868 shares were issued and outstanding as of February 2, 1998, and 3,000,000 shares of Preferred Stock, $.01 par value per share, of which no shares are issued and outstanding. The authorized capital stock of MergerSub consists of 1,000 shares of Common Stock, $.01 par value per share, of which 100 shares are issued and outstanding and owned by LAI. All of the issued and outstanding shares of LAI Common Stock and MergerSub's Common Stock are duly and validly issued, fully paid and nonassessable. No preemptive rights exist with respect to the LAI Common Stock or MergerSub's Common Stock, and none of the outstanding shares of LAI Common Stock or MergerSub's Common Stock has been issued in violation of any preemptive rights. (ii) Compliance with Law. All shares of capital stock of LAI and MergerSub and all options, warrants, scrip or rights to purchase or acquire any additional shares of LAI Common Stock have at all times been offered or issued in accordance with all applicable state and federal securities laws. (G) NO SUBSIDIARIES. LAI does not have any wholly or partially owned subsidiary and does not own any equity or voting interest in any other entity, other than MergerSub. (H) FINANCIAL STATEMENTS. LAI is subject to the reporting provisions of Section 12 of the Exchange Act, and the rules and regulations of the SEC promulgated under Section 12 of the Exchange Act. Since LAI first became subject to the reporting provisions of the Exchange Act, LAI has filed all required forms, reports, and documents with the SEC required to be filed by it pursuant to the Exchange Act and the SEC rules and regulations thereunder, all of which (collectively, the "LAI SEC Reports") have complied in all material respects with all applicable requirements of the Exchange Act and the rules promulgated thereunder. None of the LAI SEC Reports, including any 28 33 financial statements or schedules included therein (the "LAI Financial Statements"), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the LAI Financial Statements, including, in each case, any related notes: (i) has been prepared in accordance with GAAP, (ii) is true, complete and correct in all material respects as of its respective date, (iii) is in accordance with and supported by and consistent with the books and records of LAI, including a general ledger and detailed trial balances, which books and records have been maintained in accordance with good business practices, and (iv) presents fairly the financial position and the results of operations, changes in stockholders' equity, and statements of cash flow of LAI as of the dates and for the periods indicated thereon. (I) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in Exhibit 6(i) hereto, since November 30, 1997 (the date of the LAI Financial Statements included in LAI's Quarterly Report on Form 10-Q for the Quarter ended November 30, 1997): (i) LAI has conducted its business in all material respects only in the ordinary course and in a manner consistent with past practices, (ii) there have been no events, changes, developments or occurrences that have had, or that would have, individually or in the aggregate, a Material Adverse Effect on LAI, and (iii) LAI has not taken any action, or failed to take any action (whether or not in the ordinary course and consistent with past practices), prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of the covenants and agreements of LAI set forth in this Agreement. (J) NO UNDISCLOSED LIABILITIES. Except as disclosed in Exhibit 6(j) hereto, LAI does not have any material obligations or liabilities, and has not incurred or paid any obligation or liability (contingent or otherwise, and whether accrued or reserved), and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such obligation or liability, except obligations and liabilities (i) which are fully accrued or reserved against in LAI's financial statements filed with the SEC, or (ii) which were fully incurred or paid after November 30, 1997 in the ordinary course of business consistent with past practices and which in the aggregate will not have a Material Adverse Effect on LAI or the Surviving Corporation. (K) TAX MATTERS. (i) Returns. All Tax Returns required to be filed by or on behalf of LAI have been timely filed, or requests for extensions have been timely filed, granted and have not expired; all such Tax Returns filed are true, complete and accurate in all material respects; and, all Taxes shown to be due on such Tax Returns have been timely paid by LAI. Other than as set forth on Exhibit 6(k) hereto, there is no audit examination, deficiency or refund litigation or matter in controversy in which LAI has been joined as a party with respect to any Taxes, except as reserved against in the LAI Financial Statements or as disclosed in the Exhibits hereto. All Taxes and other liabilities due with respect to completed and settled examinations or concluded litigation have been paid, accrued or provided for. (ii) No Extension or Waiver. LAI has not executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due which extension or waiver is currently in effect. 29 34 (iii) Provision for Taxes Due. Adequate provision for any Taxes due or to become due for LAI for any period or periods through November 30, 1997 has been made and is reflected on the November 30, 1997 financial statements included in the LAI Financial Statements. (iv) Deferred Taxes. Deferred Taxes of LAI have been provided for in the LAI Financial Statements in accordance with GAAP. (v) Withholding. All Taxes that LAI is required by Law to withhold or to collect for payment have been duly withheld and collected, and have been paid to the proper Regulatory Authority or are held by LAI pending such payment, except for such failures which are not, individually or in the aggregate, material in amount. LAI is in compliance with, and its records contain all information and documents necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code, except for such instances of noncompliance and such omissions which would not have, individually or in the aggregate, a Material Adverse Effect on LAI. (vi) No Excess Compensation. LAI has not made any payments, is not obligated to make any payments, and is not a party to any contract, agreement or other arrangement that could obligate LAI to make any payments that reasonably could be disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue Code. (vii) No Tax Liens. There are no Liens with respect to Taxes upon any of the material assets or properties of LAI. (viii) Tax Elections. All material elections with respect to Taxes affecting LAI as of the date of this Agreement have been timely made. (L) CONDUCT OF BUSINESS. The business of LAI has been conducted in all material respects in compliance with the AESC Code of Ethics and other standards applicable to executive search firms. (M) COMPLIANCE WITH LAWS; NO VIOLATIONS. (i) Permits. LAI has in effect and holds all Permits necessary for it to own, lease, and operate its assets and properties and to carry on its business as now conducted. (ii) No Conflict. Neither LAI nor MergerSub is in conflict with, or in default under or in violation of, (A) its Articles or Certificate of Incorporation, Bylaws or comparable organizational documents, or (B) any Law, Permit, order, judgment, writ, injunction or decree applicable to its businesses or to its employees conducting such business or by which its assets or properties are bound or affected. 30 35 (N) BROKERS AND FINDERS. Except for Robert W. Baird & Co. Incorporated ("Baird"), no broker or finder has acted directly or indirectly for LAI in connection with this Agreement or the transactions contemplated hereby. (O) WARD HOWELL STOCKHOLDER MERGER MATERIALS; OTHER INFORMATION. None of the information supplied or to be supplied by LAI for inclusion in the Ward Howell Stockholder Merger Materials or any document to be filed with any Regulatory Authority in connection with the transactions contemplated hereby will, at the respective times such documents are filed and, with respect to the Ward Howell Stockholder Merger Materials, when such materials are delivered to the Ward Howell Stockholders, contain any untrue statement of or be false or misleading with respect to a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which such statements are made, not misleading. All documents that LAI or MergerSub is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form and substance in all material respects with the provisions of applicable Law, including applicable provisions of the Securities Laws. The LAI Stock and the shares of LAI Common Stock issuable upon exercise of the LAI Options (as hereinafter defined), when issued in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and non-assessable. The issuance of the LAI Options (as hereinafter defined), has been approved by the Board of Directors of LAI, and, subject to the approval by the stockholders of LAI of the 1998 Omnibus Stock and Incentive Plan at the next annual meeting of stockholders, will be incentive stock options for tax purposes to the fullest extent permitted by the Internal Revenue Code. If for any reason such stockholder approval is not forthcoming, the LAI Options shall be non-incentive stock options for tax purposes. When issued in accordance with the terms of this Agreement and the Employment Agreement referred to in Section 7(r) hereof, the LAI Options will be issued in accordance with applicable Law and, to the extent applicable, the terms of the 1997 or 1998 Omnibus Stock and Incentive Plan. (P) EMPLOYEE BENEFIT PLANS. (i) General. LAI has delivered to Ward Howell, prior to the execution of this Agreement, true, complete and correct copies of, all pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, severance pay, vacation, bonus or other incentive plans, all medical, vision, dental or other health plans, all life insurance plans and all other material employee benefit plans or fringe benefit plans, including all "employee benefit plans" (as that term is defined in Section 3(3) of ERISA) currently adopted, maintained by, sponsored in whole or in part by or contributed to by LAI or any Affiliate thereof for the benefit of LAI's employees, retirees, dependents, spouses, directors, independent contractors or other beneficiaries who are eligible to participate (collectively, the "LAI Benefit Plans"). (ii) Compliance with Law. All LAI Benefit Plans are and at all times have been in compliance in all material respects with the applicable terms of ERISA, the Internal Revenue Code, and any other applicable Laws, the breach or violation of which would be reasonably likely to have a Material Adverse Effect on LAI. 31 36 (Q) MATERIAL CONTRACT DEFAULTS. Except as set forth on Exhibit 6(q) hereto, LAI is not, and LAI has not received any notice and does not have any Knowledge that any other party is, in default in any material respect under any material contract or agreement to which it is a party, except for those defaults which would not have, individually or in the aggregate, a Material Adverse Effect on LAI; and, there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. Except as set forth on Exhibit 6(q), each of LAI's material contracts or agreements (i) is in full force and effect, and (ii) LAI has not repudiated or knowingly waived any material provision thereof. (R) LEGAL PROCEEDINGS. Except as disclosed on Exhibit 6(r) hereto, there are no actions, suits or proceedings instituted or pending or, to the Knowledge of LAI, threatened against LAI, or against any asset, property, employee benefit plan, interest or right of any of them, that would have, individually or in the aggregate, a Material Adverse Effect on LAI or that might reasonably be expected to materially threaten, impede or impair the consummation of the transactions contemplated by this Agreement. Except as disclosed on Exhibit 6(r) hereto, LAI is not a party to any agreement, contract or other instrument or subject to any restriction under its Articles of Incorporation or Bylaws, or to any other corporate restriction, nor is there any judgment, order, writ, injunction or decree of any Regulatory Authority or arbitrator that would have, individually or in the aggregate, a Material Adverse Effect on LAI or that might reasonably be expected to materially threaten, impede or impair the consummation of the transactions contemplated by this Agreement. Exhibit 6(r) includes a summary report of all actions, suits or proceedings as of the date of this Agreement to which LAI is a party and which names LAI as a defendant or a cross-defendant, and where the estimated maximum exposure is $15,000 or more. (S) LABOR MATTERS. LAI is not a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with any labor union or labor organization, nor has LAI been joined as a party in any action, suit, claim or proceeding asserting that LAI has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state law) or seeking to compel LAI to bargain with any labor organization as to wages or conditions of employment, nor is there any strike, work stoppage or other labor dispute involving LAI pending or, to the Knowledge of LAI, threatened. To the Knowledge of LAI, there is no activity involving employees of LAI seeking to certify a collective bargaining unit or engaging in any other organizing activity. Except as set forth on Exhibit 6(p) hereto, no material employment related dispute, arbitration, action, suit, claim or proceeding is pending or, to the Knowledge of LAI, threatened. 7. TRANSACTIONS AND OBLIGATIONS OF THE PARTIES. (A) CONDUCT OF BUSINESS BY WARD HOWELL. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, and except as LAI may otherwise consent in writing or as otherwise expressly contemplated by this Agreement, Ward Howell shall: (i) operate its business only in the usual, regular and ordinary course consistent with past practice, (ii) use its reasonable commercial efforts to maintain and preserve intact its business organization, assets and properties and maintain its rights and franchises, (c) use its reasonable efforts to maintain its current employee, client and other advantageous business relationships and retain the services of its officers and key employees, and (d) take no action that would adversely 32 37 affect or delay the ability of any party (i) to obtain any necessary Consents required for the Merger and other transactions contemplated hereby or (ii) to perform its covenants and agreements under this Agreement. (B) FORBEARANCE FROM CERTAIN ACTIONS BY WARD HOWELL. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, and except as LAI may otherwise consent in writing, as otherwise expressly contemplated by this Agreement or as required by Law, Ward Howell shall not: (i) Amend Governing Documents. Amend, or permit the amendment of, its Certificate of Incorporation, Bylaws, or other governing instruments, except as necessary in connection with the Pre-Closing Transactions; or (ii) Incur Additional Indebtedness. (A) Incur any additional indebtedness or other obligation for borrowed money, (B) assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any person, or (C) impose, or suffer the imposition, on any material asset or property of Ward Howell of any Lien, or permit any such Lien to exist (other than in connection with deposits, repurchase agreements, bankers acceptances, "treasury tax and loan" accounts established in the ordinary course of business and any Liens in effect as of the date hereof that are disclosed in the Exhibits to this Agreement), or (D) or make any loan or advance which would be reasonably likely to have a Material Adverse Effect on Ward Howell or the Surviving Corporation; or (iii) Modify Any Indebtedness. Cancel, release or assign any indebtedness to any person or any claims held by any such person, except in the ordinary course of business consistent with past practice or pursuant to contracts, agreements or other instruments in force at the date of this Agreement; or (iv) Issue Securities. Except in connection with the Pre-Closing Transactions, issue, sell, pledge, encumber, authorize the issuance of, enter into any contract, agreement or other contract, agreement, commitment or other instrument to issue, sell, pledge, encumber or authorize the issuance of, or otherwise permit to become outstanding, any additional shares of Ward Howell Common Stock or any other capital stock of Ward Howell (or permit the exercise of any option, warrant or other right requiring the issuance of any securities by Ward Howell), or any stock appreciation any option, warrant or conversion or other right to acquire any such stock or any security convertible into any such stock; or (v) Repurchase Securities, Etc. Repurchase, redeem or otherwise acquire or exchange, directly or indirectly, any shares, or any securities convertible into any shares, of Ward Howell Common Stock; or (vi) Declare or Pay Dividends. Make, declare or pay any dividend or make any other distribution with respect to shares of Ward Howell Common Stock, whether payable in cash, stock or property, including but not limited to any excess profit distribution; or 33 38 (vii) Adjust Capitalization. Except in connection with the Pre-Closing Transactions, adjust, split, combine or reclassify any capital stock of Ward Howell or authorize the issuance of any other securities with respect to or in substitution for shares of Ward Howell Common Stock; or (viii) Dispose of Assets. Sell, transfer, lease, mortgage or otherwise dispose of or encumber any property or asset other than in the ordinary course of business for reasonable and adequate consideration; or (ix) Make Investments. Purchase any securities or make any material investment, either by purchase of stock or securities, contribution to capital, asset transfer or purchase of any assets or property, in any person, or otherwise acquire direct or indirect control over any person, except for transactions in the ordinary course of business consistent with past practice; or (x) Modify Employment Relationships. Enter into or amend any employment agreement or similar contract or other instrument; or (xi) Modify Employee Benefits. Adopt any new employee benefit plan or similar arrangement, or make any material change in or to any existing Ward Howell Benefit Plan unless necessary or advisable to maintain the Tax qualified status of any such plan or to accelerate vesting of employer contributions under any profit sharing plans; or (xii) Modify Tax or Accounting Procedures. Make any significant change in any Tax or accounting methods or procedures or in any systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws, regulatory accounting requirements or GAAP; or (xiii) Enter Into Litigation. Commence any action, suit, proceeding or litigation, other than in accordance with past practice, or settle any action, suit, proceeding or litigation involving any liability of Ward Howell for material money damages or material restrictions upon the operations of Ward Howell; or (xiv) Modify or Terminate Contracts. Except in the ordinary course of business consistent with past practice, modify, amend or terminate any material contract, agreement or other instrument, other than renewals without material adverse change of terms, or waive, release, compromise or assign any material rights or claims; or (xv) Unusual Expenditures. Make any expenditure in excess of $10,000, other than in the ordinary course of business; or (xv) Agree to Take Prohibited Action. Agree to, or make any commitment to, take any of the actions prohibited by this Section 7(b). 34 39 (C) DISSENTING SHARES. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, Ward Howell shall give LAI and MergerSub prompt notice upon receipt by Ward Howell of any written objection to the Merger and any written demand for payment for shares of Ward Howell Common Stock, any withdrawal of any such objection or demand, and any notice or instrument provided to Ward Howell pursuant to the Connecticut Dissenters' Rights Law. (D) CERTAIN COVENANTS OF LAI. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, LAI and MergerSub covenant and agree that they shall (i) conduct their affairs in a manner designed, in their reasonable judgment, to enhance the long-term value of the LAI Common Stock and the business prospects of LAI, (ii) take no action which would (A) materially adversely affect the ability of any party to this Agreement to obtain any Consents required for the transactions contemplated hereby, or (B) Materially Adversely Affect the ability of any party to perform its covenants and agreements under this Agreement, (iii) not pay any dividend, make any distribution with respect to or redeem any shares of LAI Common Stock, and (iv) make all material filings required under applicable Securities Laws. (E) NOTIFICATION OF ADVERSE CHANGES IN CONDITION. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, each party shall promptly advise the other parties to this Agreement, orally and in writing, upon becoming aware of the occurrence or pending occurrence of any event or circumstance that is (i) reasonably likely to have a Material Adverse Effect on such party or (ii) which would cause or constitute a material breach of any of the representations, warranties, covenants or agreements of such party contained herein, and shall use its reasonable commercial efforts to prevent or promptly remedy the same. (F) GOVERNMENT FILINGS AND REPORTS. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, each party shall use its commercial efforts to file all applications, reports or other documents, including filings pursuant to state securities Laws, required to be filed by such person with any Regulatory Authority between the date of this Agreement and the Effective Time and shall deliver to the other parties copies of all such applications, reports or other documents promptly after the same are filed. (G) HCC MERGER. Immediately prior to the Effective Time: Howe-Corey Consulting Group Ltd., a Delaware corporation ("HCC"), will be merged with and into WH-Corey Mergersub, Inc., a Delaware corporation and a wholly-owned subsidiary of Ward Howell, pursuant to and in accordance with the terms of the Merger Agreement attached hereto as Exhibit 7(g) (the "HCC Merger"). (H) ISSUANCE OF BONUS SHARES. Prior to the Effective Time, Ward Howell shall issue the shares of its Common Stock set forth on Exhibit 7(h) to the Ward Howell Stockholders set forth on such Exhibit (collectively, the "Bonus Shares"). Consummation of the HCC Merger and the issuance of the Bonus Shares shall constitute the "Pre-Closing Transactions" for purposes of this Agreement. 35 40 (I) OWNERSHIP OF WARD HOWELL COMMON STOCK. Exhibit 7(h) hereto sets forth the names of the Ward Howell Stockholders, the residence and business address of each Ward Howell Stockholder, the number of shares of Ward Howell Common Stock owned by each Ward Howell Stockholder as of the date of this Agreement, and the number of shares of Ward Howell Common Stock to be owned by each Ward Howell Stockholder after the Pre-Closing Transactions. (J) DUE DILIGENCE INVESTIGATION; CONFIDENTIALITY. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, upon reasonable notice and subject to applicable Laws, each of LAI and Ward Howell shall afford each other, and each other's accountants, counsel, and other representatives, during normal business hours during the period of time prior to the Effective Time, reasonable access to all of its properties, books, contracts, commitments, records, business premises, officers, employees and professional advisors, in each case to the extent relevant to the transactions contemplated hereby. Each party hereto shall, and shall cause its advisors and representatives to, (i) conduct its investigation in such a manner as will not unreasonably interfere with the normal operations, customers or employee relations of the other, and (ii) refrain from using for any purposes other than as set forth in this Agreement and treat as confidential all information obtained hereunder or in connection herewith and not otherwise known to such party. The parties hereby confirm that the terms and provisions of the Confidentiality Letter Agreement between LAI and Ward Howell dated July 21, 1997, as amended on October 13, 1997 (the "Confidentiality Letter"), remain in full force and effect. (K) AGREEMENTS AS TO EFFORTS TO CONSUMMATE. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable commercial efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws to consummate and make effective the Merger and other transactions contemplated by this Agreement as expeditiously as practicable after the date of this Agreement, including the use of their respective reasonable commercial efforts to lift or rescind any judgment, order, writ, injunction or other decree adversely affecting the ability of the parties to consummate the transactions contemplated hereby and to cause to be satisfied the conditions referred to in Section 8; provided, however, that nothing herein shall preclude any party from exercising its rights under this Agreement. LAI and Ward Howell shall use their reasonable commercial efforts to obtain all Consents and Permits of all third parties and Regulatory Authorities necessary or desirable for the consummation of the transactions contemplated by this Agreement. Each party hereto agrees that, to the extent practicable, it will consult with the other parties to this Agreement with respect to obtaining all such Permits and Consents of third parties and Regulatory Authorities and each will keep the other parties apprized of the status of matters relating to the completion of the transactions contemplated hereby. (L) NO PURSUIT OF COMPETING TRANSACTIONS. Prior to termination of this Agreement, Ward Howell will not (i) initiate, solicit or encourage (including by way of furnishing non-public information or assistance), or take any other action intended or designed, directly or indirectly, to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Competing Transaction (as hereinafter defined), or (ii) enter into discussions or negotiate with any person or entity or otherwise cooperate in any way to obtain a Competing Transaction or otherwise in furtherance of such inquiries, or (iii) agree to or endorse any Competing Transaction, or (iv) authorize any of the directors, officers, employees, agents, representatives or 36 41 stockholders of Ward Howell to take any such action. Further, Ward Howell shall direct and instruct and use its reasonable commercial efforts to cause all directors, officers, employees, agents, representatives and stockholders of Ward Howell (including any investment banker, financial advisor, attorney, or accountant retained or engaged by Ward Howell) to not take any such action. Ward Howell shall use its reasonable commercial efforts to remain aware of, and shall promptly notify LAI of, any such inquiries or proposals received by Ward Howell or any of its officers, directors, employees, agents, representatives or stockholders, and Ward Howell shall promptly inform LAI in writing as to the material terms of any such inquiry or proposal and, if such inquiry or proposal is reflected or summarized in writing, promptly deliver or cause to be delivered to LAI a copy thereof, and also shall keep LAI informed, on a current basis, of the nature of any such inquiries and the status and terms of any such proposals; provided, however, that nothing contained in this paragraph shall prohibit Ward Howell or any of its directors, officers, employees, or agents from (i) reviewing or confirming receipt of an unsolicited bona fide proposal, or inquiry that could lead to such a proposal, to acquire Ward Howell pursuant to a merger, consolidation, share exchange, business combination, or other similar transaction (a "Bona Fide Proposal"), provided that Ward Howell shall promptly provide written notice to LAI of such Bona Fide Proposal and a copy of any communication confirming receipt thereof, or (ii) furnishing information to, or discussing or negotiating with, any person or entity that makes a Bona Fide Proposal if, but only to the extent that, (A) the Board of Directors of Ward Howell, after consultation with legal counsel, determines in good faith that such action is required or may reasonably be required for the Board of Directors of Ward Howell to comply with its duties to imposed by Law, (B) prior to furnishing such information to such person or entity, Ward Howell provides written notice to LAI to the effect that Ward Howell is furnishing information to, or entering into discussions or negotiations with, such person or entity, (C) prior to furnishing such information to such person or entity, Ward Howell receives from such person or entity an executed confidentiality agreement with terms similar to the collective confidentiality terms between Ward Howell and LAI and (D) Ward Howell keeps LAI informed, on a current basis, of the status of any such discussions or negotiations. For purposes of this Agreement, "Competing Transaction" shall mean any of the following (other than the transactions contemplated by this Agreement): (1) any merger, consolidation, share exchange, business combination, or other similar transaction; (2) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition of ten percent or more of the assets of Ward Howell or issuance of ten percent or more of the outstanding voting securities of Ward Howell in a single transaction or series of transactions; (3) any tender offer or exchange offer for ten percent or more of the outstanding shares of capital stock of Ward Howell or the filing of a registration statement under the Securities Act in connection therewith; (4) any solicitation of proxies in opposition to approval of the Merger by the stockholders of Ward Howell; (5) the acquisition by any person or group of persons of beneficial ownership or the right to acquire beneficial ownership of ten percent or more of the then outstanding shares of capital stock of Ward Howell; (6) the acquisition by any person or group of persons of control of Ward Howell; or (7) any agreement to, or public announcement by Ward Howell or any other person of a proposal, plan or intention to, do any of the foregoing. (M) EMPLOYEE BENEFITS. Following the Effective Time, LAI shall provide generally to officers and employees of Ward Howell employee benefits, including pension benefits, health and welfare benefits, life insurance and vacation on terms and conditions provided from time to time by LAI to its similarly situated officers and employees. For purposes of participation and vesting under any employee benefit plan of LAI, the service of the employees of Ward Howell prior to the 37 42 Effective Time shall be treated as service with LAI to the fullest extent permitted under applicable Law. If and to the extent that Ward Howell (i) amends the Profit Sharing Plan to incorporate the changes therein required by the Small Business Job Protection Relief Act of 1996, the Taxpayer Relief Act of 1997 and any other recent acts of Congress that require amendments to the Profit Sharing Plan in order to maintain its qualified status prior to the Effective Time and (ii) obtains an appropriate determination letter from the Internal Revenue Service with respect to its qualified status, then Ward Howell's former employees who become participants in LAI's defined contribution plan will be entitled to rollover their balances from the Profit Sharing Plan into LAI's defined contribution plan. (N) TERMINATION OF STOCKHOLDERS' AGREEMENT. The Ward Howell Stockholders and Ward Howell agree that, at and as of the Effective Time, the Stockholders Agreement entered into as of January 1, 1992 by and among Ward Howell and the Ward Howell Stockholders (in some cases, as executed at a later date by a Ward Howell Stockholder), and any other stockholders' agreement or other agreement of similar effect and all rights of first refusal contained therein or otherwise applicable to the Ward Howell Common Stock shall be void and of no further force and effect. (O) CURRENT INFORMATION. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, each of LAI and Ward Howell shall, and shall cause its representatives to, confer on a regular and frequent basis with representatives of the other. Each of Ward Howell and LAI shall promptly notify the other of (i) any material change in its business or operations, (ii) any material complaints, investigations or hearings (or communications indicating that the same may be contemplated) of any Regulatory Authority, (iii) the institution or the overt threat of any material action, suit, claim or proceeding involving such party, or (iv) the occurrence, or nonoccurrence, of any event or condition the occurrence, or nonoccurrence, of which would be reasonably expected to cause any of such party's representations or warranties set forth herein to become untrue or inaccurate in any respect as of the Closing; and in each case shall keep the other fully informed with respect thereto. (P) OTHER ACTIONS. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, no party shall take any action, except in every case as may be required by applicable Law, intended to or that would result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue, or (ii) any of the conditions set forth in this Agreement not being satisfied or a violation of any provision of this Agreement. (Q) PRESS RELEASES. During the period from the date of this Agreement until the Effective Time or the earlier termination of this Agreement, Ward Howell and LAI shall consult with each other as to the form and substance of any press release or other public disclosure materially related to this Agreement, the Merger or any other transaction contemplated hereby; provided, however, that nothing in this paragraph shall prohibit any party from making any disclosure which its counsel deems necessary or advisable in order to satisfy such party's disclosure obligations imposed by Law. 38 43 (R) CORPORATE GOVERNANCE PROVISIONS. Ward Howell shall take all necessary action to ensure that the entering into of this Agreement and the consummation of the Merger and the other transactions contemplated hereby do not and will not restrict or impair the ability of LAI or MergerSub to vote, or otherwise to exercise the rights of a stockholder with respect to, shares of Ward Howell Common Stock. (S) EXTENSION OF EXCLUSIVITY LETTER. The terms of the exclusivity letter agreement dated November 4, 1997 between LAI and Ward Howell, as amended on December 8, 1997 to extend the term thereof (collectively, the "Exclusivity Letter Agreement"), remain in full force and effect in all respects, are incorporated by reference herein, and are amended to extend the date of January 31, 1998 (the "Expiration Date") to the Effective Time. (T) EMPLOYMENT AGREEMENTS. Each Ward Howell Stockholder identified on Exhibit 7(r)-1 hereto shall enter into an Employment Agreement with the Surviving Corporation in one of the forms attached hereto as Exhibit 7(r), as LAI, the relevant Ward Howell Stockholder and Ward Howell shall have agreed given the level of such consultant's business. In connection with the execution of such Employment Agreements, LAI shall grant to the consultants entering into such agreements options to purchase, in the aggregate, 400,000 shares of LAI Common Stock (the "LAI Options"), such options to be allocated among such consultants as set forth on Exhibit 7(r)-1. LAI in its discretion may waive the requirement for all Ward Howell Stockholders to enter into Employment Agreements with respect to a small number of Ward Howell Stockholders who determine to retire from the executive search business on terms and conditions acceptable to LAI (a "Retiree Stockholder"), and who agree to enter into a Retired Partner Consulting Agreement in the form attached hereto as Exhibit 7(r). Bonus Shares will not be issued to a Retiree Stockholder. (U) LAI POST-CLOSING PAYMENT OBLIGATIONS. As the outstanding accounts receivables of Ward Howell reflected on the Ward Howell Financial Statements are collected, LAI shall pay to the former Ward Howell Stockholders entitled thereto, the accrued compensation expense relating to such accounts receivable, including without limitation the stockholder bonus component thereof, as reflected on the December 31, 1997 Ward Howell Financial Statements. Further, LAI shall distribute the accrued excess profits reflected on the December 31, 1997 Ward Howell Financial Statements in the aggregate amount of $1, 260,054.72 in accordance with the prior practices of Ward Howell. LAI shall also pay all accrued research and employee bonuses reflected on the Ward Howell Financial Statements as of December 31, 1997 in accordance with the past practices of Ward Howell. (V) CERTAIN AGREEMENTS WITH RESPECT TO LGO. (i) Distribution of Cash. Notwithstanding anything in this Agreement to the contrary, in accordance with the LGO Agreement and in conformity with the past practice of the LGO, all cash held by Ward Howell in the bank account utilized by the LGO prior to March 1, 1998, or received by Ward Howell with respect to the accounts receivable of the LGO prior to March 1, 1998 and not needed to pay LGO expenses for the period prior to such date, shall be distributed as Michael J. Corey may direct as soon as reasonably practicable after the Closing Date, based upon a Closing Date Balance Sheet of LGO to be prepared by LAI for this purpose to the satisfaction of Michael Corey and in accordance with the LGO Agreement. 39 44 (ii) Loan to Gary DeMarlie. Prior to the Closing, the loan in the amount of $10,050 made by Ward Howell shall be assigned to Michael J. Corey. (iii) Accounts Receivable. Notwithstanding the termination of the LGO Agreement as of the Effective Time or any provision of this Agreement to the contrary, the LGO Accounts Receivable shall be allocated and distributed as provided in the LGO Agreement (with the Surviving Corporation succeeding to all of the rights of Ward Howell pursuant to the LGO Agreement for this purpose), provided that the LGO Accounts Receivable were billed in the ordinary course of business and in conformity to the engagement letters to which they relate. In this connection, LAI shall provide Michael J. Corey with information relating to the collection on the LGO Accounts Receivable on a monthly basis. In addition, LAI will provide the LGO Stockholders with sufficient support at the LGO to facilitate the efficient collection of the LGO Accounts Receivable and their distribution in accordance with this provision. 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES. (A) CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of each party to perform this Agreement and consummate the Merger and the other transactions contemplated hereby shall be subject to the satisfaction of the following conditions, unless waived by both parties in writing as of the Closing Date: (i) Stockholder Approval. The Ward Howell Stockholders shall have approved this Agreement, and the consummation of the transactions contemplated hereby, including the Merger, as and to the extent required by Law. (ii) Legal Proceedings. No Law, judgment, order, injunction, writ , decree, ruling or other legal restraint or prohibition, whether temporary, preliminary or permanent, which prohibits, restricts or makes illegal the consummation of the Merger or any other action or transaction contemplated hereby shall have been enacted, entered, promulgated or enforced by any Regulatory Authority, and no action or proceeding seeking any of the foregoing shall be pending. (iii) Adjusted Pro Forma EBIT. The Adjusted Pro Forma EBIT of Ward Howell for the year ending December 31, 1997 shall be not less than $2.2 million. (B) CONDITIONS TO OBLIGATIONS OF LAI TO EFFECT THE MERGER. The obligations of LAI to perform this Agreement and to consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following additional conditions, unless waived by LAI in writing as of the Closing Date: (i) Representations and Warranties. The representations and warranties of Ward Howell and the Ward Howell Stockholders set forth in this Agreement shall be true and correct in all material respects both as of the date of this Agreement and as of the Effective Time as though then made. 40 45 (ii) Performance of Covenants and Agreements. Each and all of the agreements and covenants of Ward Howell and the Ward Howell Stockholders to be performed or complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects. (iii) No Material Adverse Change. There shall have been no Material Adverse Change in the financial condition, business or prospects of Ward Howell. (iv) Consents and Approvals. Ward Howell shall have obtained any and all Consents required for consummation of the Merger and the other transactions contemplated hereby, or for preventing any default under any agreement, contract, other instrument or Permit to which Ward Howell is a party, which, if not obtained or made, would be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Ward Howell or the Surviving Corporation. (v) Certificates. Ward Howell shall have delivered to LAI (i) a certificate, dated as of the Closing Date, signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions to its obligations under this Agreement to be satisfied prior to the Effective Time have been satisfied, and (ii) copies of all documents that LAI may reasonably request relating to the existence of Ward Howell and certified copies of resolutions or written consents duly adopted by Ward Howell's Board of Directors and the Ward Howell Stockholders evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as LAI and its counsel may reasonably request. (vi) Dissenters' Rights. Owners of record of no more than ten percent (10%) of the issued and outstanding shares of Ward Howell Common Stock shall have effectively exercised rights under the Connecticut Dissenters' Rights Law with respect to the Merger. (vii) Employment Agreements. Each Ward Howell Stockholder identified on Exhibit 7(r)-1 hereto shall have entered into an Employment Agreement or a Retired Partner Consulting Agreement with the Surviving Corporation as contemplated by Section 7(r). (viii) Joinder Agreements; Lockup Agreements. Each of the Ward Howell Stockholders shall have executed and delivered to LAI a Joinder Agreement substantially in the form of that attached hereto as Exhibit 8(b)(viii) hereto. Each of the Ward Howell Stockholders shall have executed and delivered to Baird a Lockup Agreement in substantially the same form as is attached as Exhibit 8(b)(viii) hereto. (ix) Ownership of Ward Howell Common Stock. The Pre-Closing Transactions shall have been effected immediately prior to the Effective Time, and therefore each Ward Howell Stockholder shall own that number of shares of Ward Howell Common Stock indicated on Exhibit 8(b)(ix) hereto. No other person shall own any Ward Howell Common Stock. (x) Net Worth of Ward Howell. Ward Howell shall have (i) total stockholders' equity as of December 31, 1997 as determined with reference to the December 31, 1997 audited 41 46 balance sheet of Ward Howell (the "December 31, 1997 Net Worth") of not less than $1,600,000, and (ii) total stockholders' equity as of immediately prior to the Effective Time, determined in accordance with GAAP and Regulation S-X (the "Closing Net Worth"), of not less than $1,400,000, determined in each case without regard to any effect on the stockholders' equity of Ward Howell resulting from (1) the reasonable direct expenses of Ward Howell in effecting the Merger which do not exceed $500,000, (2) the Pre-Closing Transactions or (3) any item referred to in Section 3(b)(ii) of this Agreement that reduced the aggregate Merger Consideration). (xi) Opinion of Counsel. LAI shall have received a written opinion of Paul, Hastings, Janofsky & Walker LLP, counsel to Ward Howell, dated as of the Closing Date, to the effect set forth in Exhibit 8(b)(xii) hereto. (xii) Ward Howell Stockholder Information. LAI shall have received from each Ward Howell Stockholder representations as to the suitability for such Ward Howell Stockholder of an investment in the LAI Stock, and from each Ward Howell Stockholder who is an "accredited investor" (within the meaning of Regulation D promulgated by the SEC under the Securities Act) representations to that effect, and such other or additional assurances from the Ward Howell Stockholders and/or Ward Howell as LAI may reasonably require to assure itself that the issuance of the LAI Stock and the LAI Notes pursuant to this Agreement will comply with applicable Securities Laws, in each case in form and substance reasonably satisfactory to LAI. (xiii) Ward Howell Insider Loans. All Ward Howell Insider Loans shall have been paid in full as contemplated by this Agreement. (C) CONDITIONS TO OBLIGATION OF WARD HOWELL TO EFFECT THE MERGER. The obligations of Ward Howell to perform this Agreement and consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Ward Howell in writing as of the Closing Date: (i) Representations and Warranties. The representations and warranties of LAI and MergerSub set forth in this Agreement shall be true and correct in all material respects both as of the date of this Agreement and as of the Effective Time as though then made. (ii) Performance of Covenants and Agreements. Each and all of the agreements and covenants of LAI and MergerSub to be performed or complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects. (iii) Consents and Approvals. LAI and MergerSub shall have obtained any and all Consents required for consummation of the Merger and the other transactions contemplated hereby, or for preventing any default under any agreement, contract, other instrument or Permit to which LAI or MergerSub is a party, which, if not obtained or made, would be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on LAI or the Surviving Corporation. 42 47 (iv) Certificates. LAI shall have delivered to Ward Howell (i) a certificate, dated as of the Closing Date, signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions to its obligations under this Agreement to be satisfied prior to the Effective Time have been satisfied, and (ii) copies of all documents that Ward Howell may reasonably request relating to the existence of LAI and certified copies of resolutions or written consents duly adopted by LAI's Board of Directors evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Ward Howell and its counsel may request. (v) Material Adverse Change. There shall have been no Material Adverse Change in the financial conditions, business, or prospects of LAI. (vi) Opinion of Counsel. Ward Howell shall have received a written opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, counsel to LAI, dated as of the Effective Time, to the effect set forth in Exhibit 8(c)(vii) hereto. (vii) Payment of Consideration. LAI shall have delivered to the Ward Howell Stockholders the aggregate Merger Consideration. 9. INDEMNIFICATION. (A) GENERAL - INDEMNIFICATIONS BY WARD HOWELL AND THE WARD HOWELL STOCKHOLDERS. Ward Howell and each of the Ward Howell Stockholders, severally on a pro rata basis in proportion to the aggregate Merger Consideration received by such Ward Howell Stockholder but not jointly, does hereby agree to indemnify and hold harmless LAI and MergerSub from, for and against any actual claim, loss, damage, liability or expense (including without limitation, attorneys' and legal assistants' fees and other costs and expenses incident to any suit, action, investigation or other proceeding), arising in connection with, from, under or out of: (i) Failure to Perform. Any failure of Ward Howell or such Ward Howell Stockholder duly to perform or observe any term, provision, covenant, agreement or condition required by this Agreement to be performed or observed by either of them prior to Closing; (ii) Failure to Pay. Any failure of Ward Howell or such Ward Howell Stockholder to pay, discharge or comply with any obligation, liability or commitment of Ward Howell or a Ward Howell Stockholder arising under this Agreement prior to Closing; (iii) Breach of Warranty. Any inaccuracy in, or breach by Ward Howell or a Ward Howell Stockholder of, any representation, warranty, covenant or agreement made by either of them in this Agreement, the Exhibits hereto or any document or paper delivered in connection with the transactions contemplated hereby; or (iv) Litigation. Any action, suit, proceeding, assessment or judgment arising out of or incident to any of the matters indemnified against by Ward Howell and the Ward Howell Stockholders in this Section 9, including reasonable fees and disbursements of counsel. 43 48 (B) GENERAL - INDEMNIFICATIONS BY LAI AND MERGERSUB. Each of LAI and MergerSub, jointly and severally, does hereby agree to indemnify and hold harmless Ward Howell and the Ward Howell Stockholders from, for and against any actual claim, loss, damage, liability or expense (including without limitation, attorneys' and legal assistants' fees and other costs and expenses incident to any suit, action, investigation or other proceeding), arising in connection with, from, under or out of: (i) Failure to Perform. Any failure of LAI or MergerSub duly to perform or observe any term, provision, covenant, agreement or condition required by this Agreement to be performed or observed by either of them; (ii) Failure to Pay. Any failure by LAI or MergerSub to pay, discharge or comply with any obligation, liability or commitment of LAI or MergerSub; (iii) Breach of Warranty. Any inaccuracy in, or breach by LAI or MergerSub of, any representation, warranty, covenant or agreement made by any of them in this Agreement, the Exhibits hereto or any document or paper delivered in connection with the transactions contemplated hereby; or (iv) Litigation. Any action, suit, proceeding, assessment or judgment arising out of or incident to any of the matters indemnified against by LAI and MergerSub in this Section 9, including reasonable fees and disbursements of counsel. (C) CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for indemnification under this Section 9, the party or parties entitled to be indemnified, whether one party or more (such party or parties being referred to in this Agreement as the "Indemnified Party") shall notify the party or parties (as the case may be) against whom indemnification is sought, whether one party or more (such party or parties being referred to in this Agreement as the "Indemnifying Party") of the facts constituting the basis for such claim. Such notice shall specify all material facts known to the Indemnified Party giving rise to such indemnification right and the amount or an estimate of the amount of the liability arising therefrom. (D) RIGHT TO DEFEND. If any action, proceeding or investigation for which indemnification is sought hereunder is brought against any Indemnified Party and it notifies the Indemnifying Party of the commencement thereof as required pursuant to Section 9(c) above, the Indemnifying Party will be entitled to participate in, and, to the extent that it may wish, jointly with any other Indemnifying Party, to assume the defense thereof subject to the provisions herein stated, with counsel reasonably satisfactory to the Indemnified Party, and after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, then notwithstanding anything to the contrary contained herein, the Indemnifying party will not be liable under this Section 9 for any legal or other expenses subsequently incurred by such Indemnified party in connection with the defense thereof other than reasonable costs of investigation. The Indemnified Party will have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel will not be at the expense of the Indemnifying Party if the Indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the Indemnified Party. No settlement of any action against an Indemnified 44 49 Party will be made without the consent of the Indemnifying Party and the Indemnified Party, which consent shall not be unreasonably withheld or delayed in light of all factors of importance to such party and no Indemnifying Party shall be liable to indemnify any person for any settlement of any such claim effected without such Indemnifying Party's consent. Notwithstanding the foregoing, an Indemnifying Party may, without the consent of the Indemnified Party, consent to the entry of a judgment or enter into the settlement of an action if such judgment or settlement (i) includes as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release of all liability in respect of such claim or litigation, and (ii) involves money damages only and does not include a statement as to an admission of fault, culpability or a failure to act on behalf of an Indemnified Party. The Ward Howell Stockholders hereby appoint Ken Lanno or his designee to act as their agent (the "Agent") for all purposes relating to this Section 9 and LAI and MergerSub are hereby instructed to send all notices required or permitted to be given or made under or pursuant to this Section 9 to the Agent in lieu of any notices to the Ward Howell Stockholders individually. (E) COOPERATION. The parties to this Agreement shall execute such powers of attorney as may reasonably be necessary or appropriate to permit participation of counsel selected by any party hereto and, as may reasonably be related to any such claim or action, shall provide access to the counsel, accountants and other representatives of each party during normal business hours to all properties, personnel, books, tax records, contracts, commitments and all other business records of such other party and will furnish to such other party copies of all such documents as may reasonably be requested (certified, if requested). (F) LIMITATION. An Indemnifying Party shall be obligated to indemnify an Indemnified Party, and a claim for indemnification under this Section 9 may be brought, only to the extent that the aggregate net amount of any damages, losses, liabilities, costs and expenses, as determined in accordance with the next following sentence of this paragraph, actually paid or suffered by the Indemnified Party as to which a right of indemnification is provided under this Section 9 exceeds $150,000, except that no such $150,000 limitation shall apply with respect to any damages, loses, liabilities, costs and expenses arising out of or based upon (i) any violation of the representation set forth in Sections 5(f)(i) or Section 5(f)(ii) here or (ii) the failure to obtain any consent of a landlord of Ward Howell required to be obtained under Section 8(b)(iv) hereof and the cost of obtaining consents to Merger from any such landlord (including additional rental costs until the end of the term of any such lease resulting from the failure to obtain such consent but not including moving costs caused by the failure to obtain any such consent. Further, in no event shall the aggregate liability of Ward Howell and the Ward Howell Stockholders on the one hand, or LAI and MergerSub on the other hand, under this Section 9 exceed the aggregate Merger Consideration, and in no event shall the liability of any individual Ward Howell Stockholder under this Section 9 exceed the Merger Consideration received by that Stockholder. In addition, there shall be no right to indemnification for LAI or MergerSub from Ward Howell or the Ward Howell Stockholders pursuant to this Section 9 for a breach or violation by Ward Howell or any of the Ward Howell Stockholders of the representation and warranty set forth in Section 5(p) unless such breach or violation constitutes fraud on the part of Ward Howell or any of the Ward Howell Stockholders, and the sole remedy for such a breach or violation not involving fraud shall be a reduction in the Merger Consideration as set forth in Section 3(b)(ii)(B). For these purposes, the aggregate Merger Consideration shall be deemed to be the amount of the Cash Consideration, plus the aggregate original principal amount of the LAI 45 50 Notes, plus the number of shares of LAI Stock multiplied by the Fair Market Value per share of LAI Common Stock. In determining the net amount of such damages, losses, liabilities, costs or expenses for which indemnification is required hereunder, the gross amount of such damages, losses, liabilities, costs or expenses shall be reduced by any proceeds of insurance, related claims, crossclaims, counterclaims and the like actually collected by the Indemnified Party in connection therewith, and by any tax benefits received by the Indemnified Party in connection therewith. (G) OFFSET. With respect to any claims by LAI against Ward Howell or a Ward Howell Stockholder for indemnification under this Section 9, in furtherance and not in limitation of its rights under this Agreement, LAI, at its option, shall be entitled to a right of offset against any amounts owed by LAI to the Ward Howell Stockholders under the LAI Notes. This right of offset shall be exercised in the following manner. Immediately after a claim for indemnification is made by LAI against Ward Howell or a Ward Howell Stockholder for indemnification under this Section 9, a reasonable good faith estimate (the "Estimate") of the claim shall be made by LAI. Thereafter, any outstanding amounts owed by LAI to the Ward Howell Stockholders pursuant to the LAI Notes shall be paid to the Ward Howell Stockholders only to the extent that the amount of any payments outstanding on the LAI Notes (determined on a pro rata basis with respect to each Ward Howell Stockholder) exceeds the Ward Howell Stockholder's pro rata portion of the Estimate. The payments remaining under the LAI Notes in the amount of the Estimate shall be paid to an escrow agent to be mutually agreed upon by the parties, shall be deposited in an interest bearing account once the amount remaining to be paid thereunder is equivalent to the Estimate, and shall be held in escrow until such time as the amount of such indemnification has been determined by mutual agreement of the parties or by an arbitrator as set forth in Section 12(b) hereof. Interest on amounts deposited in escrow pursuant to this Section 9(g) shall be paid to the party or parties entitled to receive the principal thereof on a pro rata basis. (H) TERMINATION OF SUBSIDIARY OBLIGATIONS. From and after the Effective Time, the Surviving Corporation shall have no obligation under this Agreement to LAI. 10. TERMINATION. (A) TERMINATION. Notwithstanding any other provision of this Agreement, this Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time by action taken or authorized by the Board of Directors of the terminating party or parties: (i) Mutual Agreement. By mutual written agreement of LAI and Ward Howell, with or without the agreement, consent or participation of any Ward Howell Stockholder; or (ii) For Material Breach. (1) By Ward Howell. By Ward Howell in the event of any inaccuracy in any representation or warranty or any breach of any covenant or agreement of LAI or MergerSub contained in this Agreement, which inaccuracy or breach cannot be or has not been cured within thirty (30) days after the giving of written notice thereof and which would provide Ward Howell or any Ward Howell Stockholder with the right under Section 8 of this Agreement to refuse to consummate the Merger, but only if neither Ward Howell nor any Ward Howell Stockholder is then 46 51 in material breach of any representation, warranty, covenant or agreement of any of them contained in this Agreement; or (2) By LAI. By LAI in the event of any inaccuracy in any representation or warranty or any breach of any covenant or agreement of Ward Howell or any Ward Howell Stockholder contained in this Agreement, which inaccuracy or breach cannot be or has not been cured within thirty (30) days after the giving of written notice thereof and which would provide LAI with the right under Section 8 of this Agreement to refuse to consummate the Merger, but only if neither LAI nor MergerSub is then in material breach of any representation, warranty, covenant or agreement of either of them contained in this Agreement; or (iii) Upon Significant Exercise of Dissenters' Rights. By LAI, in the event that owners of record of more than 10% of the then issued and outstanding shares of Ward Howell Common Stock indicate an intention to exercise rights under the Connecticut Dissenters' Rights Law; or (iv) Passage of Time. By either LAI or Ward Howell, in the event that the Effective Time shall not have occurred, or it shall have become highly likely that the Effective Time shall not occur, or it shall be the case that any of the conditions precedent to the obligations of such party to consummate the Merger is highly unlikely to be satisfied or fulfilled, on or before February 28, 1998; provided, however, that the right to terminate this Agreement pursuant to this paragraph shall not be available to any party whose breach of its obligations under this Agreement has been the cause of or resulted in the failure of the Effective Time to occur or a condition to be satisfied on or before such date. (B) EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to Section 10(a) of this Agreement, this Agreement shall become void and have no effect and no party shall have any obligation to the other parties hereto with respect to this Agreement, except that (i) the provisions of Sections 7(i), 7(o), 10(b), 11(a), 11(b) and 11(c) of this Agreement shall survive any such termination, and (ii) termination shall not relieve or release a breaching party from liability for an uncured willful breach of a representation, warranty, covenant or agreement giving rise to such termination. 11. MISCELLANEOUS. (A) SURVIVAL OF CERTAIN PROVISIONS. Each of the representations, warranties, obligations, covenants and agreements of LAI, MergerSub, Ward Howell and the Ward Howell Stockholders included or provided for in this Agreement or in any Exhibit to this Agreement or in any agreement, certificate or other document or instrument executed and delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement for a period of eighteen months after the Closing Date, except that each of the representations and warranties set forth in Sections 5(k), 5(v), 5(bb), 6(k) and 6(o)of this Agreement and all of the representations and warranties set forth in this Agreement, only to the extent that they relate in any way to employment or personnel matters, shall survive the Closing Date and continue in full force and effect for so long as, under applicable law, there may be asserted and maintained in a court of competent jurisdiction a claim against the party making such representation 47 52 or warranty that, if successful, would cause such representation or warranty to have been false or incorrect when made, plus sixty (60) days. (B) RESOLUTION OF DISPUTES. Should any dispute arise among or between one or more of the parties to this Agreement relating to this Agreement, the interpretation of any provision hereof, or any of the rights or obligations hereunder of any of the parties to this Agreement, then at the election of any party involved in such dispute such dispute shall be resolved finally by a single arbitrator in an arbitration proceeding conforming to the rules of the American Arbitration Association applicable to commercial arbitrations. Said arbitrator shall be appointed as follows: of LAI (and, if prior to the Effective Time, MergerSub) on the one hand, and the Ward Howell Stockholders (and, if prior to the Effective Time, Ward Howell) on the other hand, the party not electing to submit the matter to arbitration (the "Non-Electing Party") shall provide to the other (the "Electing Party") a list of three proposed arbitrators, each of whom shall be knowledgeable as to matters that are the subject of the dispute and each of whom shall be completely independent of and with no prior affiliation or direct or indirect relationship with any party or any of their Affiliates. The Electing Party shall then select the arbitrator from such list or, if all such proposed arbitrators are reasonably unacceptable to such party, so advise the Non-Electing Party whereupon such party shall prepare a new list of three proposed arbitrators and the selection process shall begin anew. The arbitration shall take place in Tampa, Florida, New York, New York, Los Angeles, California or Chicago, Illinois and the decision of such arbitrator shall be final and binding upon the parties, and such decision shall be enforceable as a judgment in a court of competent jurisdiction. Other than the right to seek specific performance by way of injunctive relief to enforce the provisions of this Agreement, each party to this Agreement covenants not to institute any suit or other proceeding in any court with respect to any matter arising under or pursuant to or directly or indirectly relating to this Agreement, the subject matter hereof or the other agreements, documents and instruments delivered or required to be delivered hereunder or in connection herewith unless the intended subject matter thereof has first been submitted for arbitration in accordance with the foregoing procedure and such arbitration proceeding has been completed. In order to maintain the confidentiality of the dispute intended to be resolved by arbitration as provided in this Agreement as well as the information adduced and contentions asserted in any such arbitration, the parties agree to maintain in strict confidence and agree to neither make nor suffer any public disclosure of the fact of, contentions or evidence, discovered, developed or introduced in and the result of any such arbitration; provided, however, the foregoing to the contrary notwithstanding, that LAI may make public disclosures regarding the existence of the arbitration, the nature of the dispute and the results thereof as may be necessary or appropriate to satisfy its disclosure obligations under applicable Securities Laws or other Laws. (C) EXPENSES. Except as otherwise specifically provided in this Agreement, each party hereto shall bear and pay its own costs and expenses incident to preparing, entering into and carrying out this Agreement and pursuing and consummating the Merger. The expenses of preparing and printing the portion of the Ward Howell Stockholder Merger Materials prepared by Ward Howell, including mailing, shall be borne by Ward Howell. The cost of preparing and printing the portion of the Ward Howell Stockholder Merger Materials prepared by LAI shall be borne by LAI. 48 53 (D) ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this Agreement, which includes all Exhibits hereto, and the other documents, agreements, and instruments, executed and delivered pursuant to or in connection with this Agreement, contain the entire agreement between the parties hereto with respect to the transactions contemplated hereby, and this Agreement supersedes all prior arrangements or understandings with respect to the subject matter hereof, both written and oral. Nothing in this Agreement, expressed or implied, is intended to confer upon any person, other than the parties to this Agreement, any rights, remedies, obligations or liabilities. (E) AMENDMENT AND MODIFICATION. This Agreement may be amended, modified or supplemented only by an agreement in writing signed by each of the parties to this Agreement, including each of the Ward Howell Stockholders. (F) WAIVERS. Prior to or at the Effective Time, each of LAI on the one hand and Ward Howell on the other hand, shall have the right to waive (including, in the case of Ward Howell, on behalf of all Ward Howell Stockholders) any default in the performance of any provision of this Agreement by the other, to waive or extend the time for the compliance or fulfillment by the other of any and all of the other's obligations under this Agreement, and to waive any or all of the conditions precedent to its obligations under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law, which violation would have a Material Adverse Effect on the party purporting or attempting to make such waiver. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition or the breach of any provision of this Agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such condition or breach or a waiver of any other condition or of any breach of any other provision of this Agreement. (G) NO ASSIGNMENT. None of the parties hereto may assign any of its rights or delegate any of its obligations under this Agreement to any other person and any such purported assignment or delegation that is made without the prior written consent of the other parties to this Agreement shall be void and of no force or effect whatsoever. (H) NOTICES. Any notice, request, demand or other communication required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been duly given: upon receipt if personally delivered; upon successful completion of transmission if transmitted by telecopy, electronic telephone line facsimile transmission or other similar electronic or digital transmission method; at the close of business on the next business day after it is sent, if sent by recognized overnight delivery service with all fees paid in advance by the sender; or at the close of business on the fifth business day after it is sent, if mailed, first class mail, proper postage prepaid, in each case transmitted or addressed to: 49 54 LAI or MergerSub: Lamalie Associates, Inc. 3903 Northdale Blvd. Tampa, Florida 33624 ATTN: Jack P. Wissman Executive Vice President Copy to Counsel: Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis 2700 Barnett Plaza 101 East Kennedy Blvd. Post Office Box 1102 Tampa, Florida 33601-1102 ATTN: Richard M. Leisner, Esquire Ward Howell or any Ward Howell Stockholder:. Ward Howell International, Inc. 99 Park Avenue 20th Floor New York, New York 10016-1690 ATTN: David L. Witte Copy to Counsel: Paul, Hastings, Jannosky & Walker, L.L.P. 55 South Flower Street Los Angeles, CA 90071-2371 ATTN: Anna M. Graves Morrison, Cohen, Singer & Weinstein, L.L.P. 750 Lexington Avenue New York, New York 10022 ATTN: Brian B. Snarr or to such other address as any recipient party may have specified in writing to the other parties in accordance with the foregoing. 50 55 (I) CONSTRUCTION AND INTERPRETATION (i) Florida Law Applies. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida (except that any provision of Florida law shall not apply if the effect of such provision would be to result in the application of the substantive law of a state or jurisdiction other than Florida). (ii) Headings. The headings of the various sections in this Agreement are inserted for the convenience of the parties and shall not affect the meaning, construction or interpretation of this Agreement or any provision hereof. (iii) Severability. Any provision of this Agreement which is determined by a court of competent jurisdiction to be prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. In any such case, such determination shall not affect any other provision of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect. If any provision or term of this Agreement is susceptible to two or more constructions or interpretations, one or more of which would render the provision or term void or unenforceable, the parties agree that a construction or interpretation which renders the term or provision valid shall be favored. (J) ENFORCEMENT OF AGREEMENT. Each party hereto agrees that irreparable damage will occur if any of the provisions of this Agreement is not performed in accordance with its specific terms or is otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States of any state having jurisdiction, this being in addition to any other remedy to which such party may be entitled at law or in equity. The prevailing party in any action brought to enforce this Agreement shall be entitled to recover all reasonable costs and expenses of enforcement (including reasonable attorneys' fees and reasonable expenses during investigation, before litigation or arbitration, and at trial and in appellate proceedings). The parties' costs of enforcing this Agreement shall include prejudgment interest. Additionally, if any party incurs any out-of-pocket expenses in connection with the enforcement of this Agreement, all such amounts shall accrue interest at 10% per annum (or such lower rate as may be required to avoid any limit imposed by applicable law) commencing 30 days after any such expenses are incurred. (K) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to constitute an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement, with knowledge of its contents and meaning and intending to be bound hereby, as of the date first written above. 51 56 ATTEST: LAMALIE ASSOCIATES, INC. By: By: ---------------------------- -------------------------------- Jack P. Wissman, Secretary Robert L. Pearson, President ATTEST: WARD HOWELL INTERNATIONAL, INC. By: By: ---------------------------- -------------------------------- David L. Witte, Secretary ATTEST: LAI MERGERSUB, INC. By: By: ---------------------------- -------------------------------- Jack P. Wissman, Secretary Robert L. Pearson, President 52 EX-2.2 3 CHARTWELL PARTNERS INT'L ASSET PURCHASE AGREEMENT 1 EXHIBIT 2.2 ================================================================================ ================================================================================ ASSET PURCHASE AGREEMENT by and among LAMALIE ASSOCIATES, INC., CHARTWELL PARTNERS INTERNATIONAL, INC. and DAVID M. DEWILDE December 29, 1997 ================================================================================ ================================================================================ 2 TABLE OF CONTENTS 1. PURCHASE AND SALE OF ASSETS; CLOSING.................................1 (a) Purchase and Sale of Assets -- Generally....................1 (b) Assets......................................................1 (i) Generally..........................................1 (ii) Specified Items....................................2 (c) Excluded Assets.............................................3 (d) Procedure for Closing.......................................3 (e) Closing Costs...............................................3 2. PURCHASE PRICE; ASSUMPTION OF LIABILITIES............................4 (a) Purchase Price..............................................4 (b) Payment of Purchase Price...................................4 (c) Legend on Note..............................................5 (d) Acceleration of Note........................................5 (e) Tangible Book Value; Proration of Certain Expenses..........5 (f) Assumption of Liabilities...................................5 (g) Allocation of Purchase Price................................6 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDER.....6 (a) Organization and Standing...................................6 (b) Stock Ownership.............................................6 (c) Authority Relative to this Agreement........................6 (d) No Violations...............................................6 (e) Compliance with Agreements..................................7 (f) Tax Matters.................................................7 (g) Litigation..................................................7 (h) Title to and Condition of Assets............................7 (i) Client List; Engagement Letters.............................8 (j) Real Property Leases........................................8 (k) Customers/Clients...........................................8 (l) Employees...................................................8 (m) Employee Benefits...........................................9 (n) Owned Personal Property.....................................9 (o) Leased Personal Property....................................9 (p) Financial Statements.......................................10 (q) Insurance..................................................10 (r) Absence of Certain Changes or Events.......................10 (s) Compliance With Applicable Laws............................10 (t) Approvals and Consents.....................................11 (u) Disclosure.................................................11 (v) No Undisclosed Changes.....................................11
i 3 (w) Investment Representations.................................11 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ....................12 (a) Organization and Standing..................................12 (b) Authority Relative to this Agreement.......................12 (c) No Violations..............................................12 (d) LAI Stock..................................................12 (e) Financial Statements.......................................12 (f) Compliance with Agreements.................................13 (g) Compliance With Applicable Laws............................13 (h) Nasdaq.....................................................13 (i) Disclosure.................................................13 5. DUE DILIGENCE INVESTIGATION.........................................13 6. TRANSACTIONS PENDING CLOSING........................................13 (a) Business in the Ordinary Course............................13 (b) Notification of Change.....................................14 (c) Corporate Action; Approvals and Consents...................14 (d) Other Transactions Prohibited..............................14 (e) Disclosure of Transactions.................................14 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER............14 (a) Accuracy of Representations and Warranties.................15 (b) Employment Agreement.......................................15 (c) Lock-Up Agreement..........................................15 (d) Barnett Consent............................................15 (e) Compliance.................................................15 (f) No Material Adverse Change Prior to Closing................15 (g) Consents and Waivers.......................................15 (h) Active Status Certificate; Certified Copy of Articles......16 (i) Certificate................................................16 (j) Instruments of Transfer....................................16 (k) Opinion of Seller's Counsel................................16 (l) Litigation.................................................16 (m) Casualty...................................................16 (n) Termination of Financing Statements........................16 (o) Actions, Proceedings, Etc..................................17 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER AND THE STOCKHOLDER..........................................17 (a) Accuracy of Representations and Warranties.................17 (b) Compliance.................................................17 (c) Certificate of the Purchaser...............................17
ii 4 (d) Employment Agreement.......................................18 (e) Opinion of Purchaser's Counsel.............................18 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, OBLIGATIONS, COVENANTS AND AGREEMENTS...............................18 10. INDEMNIFICATION.....................................................18 (a) Indemnifications by the Seller and the Stockholder.........18 (b) Indemnification by the Purchaser...........................19 (c) Claims for Indemnification.................................19 (d) Right to Defend; Third-Party Claims, Etc...................19 (e) Cooperation................................................20 (f) Offset.....................................................20 11. OBLIGATIONS AFTER THE CLOSING.......................................20 (a) Distribution of Consideration..............................20 (b) Transition of Business.....................................21 (c) Post Closing Access to Financial Records...................21 (d) Employment of Employees; Benefit Plans.....................21 12. RESTRICTIVE COVENANTS...............................................21 (a) Noncompetition.............................................21 (b) Nonsolicitation of Clients and Employees...................21 (c) Extension of Time..........................................22 (d) Essential Elements.........................................22 (e) Severability...............................................22 (f) Termination Without Good Cause.............................23 13. GENERAL.............................................................23 (a) No Brokers.................................................23 (b) Waivers....................................................23 (c) Remedies...................................................23 (i) General...........................................23 (ii) Mandatory Arbitration.............................23 (d) Expenses...................................................24 (e) Press Releases.............................................24 (f) Confidentiality............................................24 (g) Notices....................................................25 (h) Entire Agreement; Amendment................................25 (i) Assignability..............................................25 (j) Venue; Process.............................................25 (k) Further Assurances.........................................25 (l) Counterparts...............................................25 (m) Section and Other Headings.................................25 (n) Governing Law..............................................26
iii 5 ASSET PURCHASE AGREEMENT THIS prevailing ASSET PURCHASE AGREEMENT is made and entered into this 29th of December, 1997, by and among LAMALIE ASSOCIATES, INC., a Florida corporation, (the "Purchaser"); CHARTWELL PARTNERS INTERNATIONAL, INC., a California corporation, (the "Seller"); and DAVID M. DEWILDE, an individual resident of the State of California (the "Stockholder"). WITNESSETH: WHEREAS, the Seller is engaged in the executive search business (the "Business"); and WHEREAS, the Stockholder is the owner of one hundred percent (100%) of the issued and outstanding stock of the Seller; and WHEREAS, the Purchaser desires to purchase certain of the assets used in the operation of the Business of the Seller, and the Seller desires to sell such assets, all upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained in this Agreement, and in order to consummate the purchase and sale of the property aforementioned, it is hereby agreed as follows: 1. PURCHASE AND SALE OF ASSETS; CLOSING. (a) Purchase and Sale of Assets -- Generally. In reliance upon the warranties, representations and covenants contained in this Agreement and on the terms and subject to the conditions of this Agreement, Seller hereby agrees that at the Closing (as defined below) it will, in the manner specified in this Agreement, sell, convey, transfer, assign and deliver to Purchaser, and Purchaser hereby agrees that at the Closing it will purchase from Seller, the Business as a going concern and all of the right, title and interest of Seller in and to all of the "Assets" (as defined below), free and clear of all liabilities (fixed or contingent), obligations, security interests, liens, claims or encumbrances of any nature or kind whatsoever except "Assumed Liabilities" (as defined below). (b) Assets. (i) Generally. For purposes of this Agreement, "Assets" shall mean all of the right, title and interest of Seller in and to any and all of the assets, properties, and rights (of every type, kind, nature and description whatsoever, tangible and intangible, real and personal, wherever located and whether or not reflected on the books of Seller) that, as of the date of this Agreement (the "Effective Date") or at any time between the Effective Date and the "Closing Date" (as defined below), constitute the Business or part thereof or are used by Seller in the operation of the Business. Notwithstanding the foregoing, Seller shall not sell and Purchaser shall not purchase 1 6 or acquire and the Assets shall not include any "Excluded Assets" (as defined below) or any other assets, properties and rights specifically excluded from the Assets by this Agreement. (ii) Specified Items. By way of explanation and not in limitation of the foregoing, the "Assets" shall include all of the right, title and interest of Seller in and to any and all of the following (other than Excluded Assets) that, as of the Effective Date or at any time between the Effective Date and the "Closing Date" (as defined below), constitute the Business or part thereof or are used by Seller in the operation of the Business: (1) the name "Chartwell Partners International" and all rights and benefits associated therewith; (2) all rights as lessee in, to, and under all real estate leases to which Seller is a party as lessee (the "Real Property Leases"), together with all of Seller's right, title and interest in the fixtures and improvements, including construction-in-progress, and appurtenances thereto, located on the real property subject to such leases (all such parcels of real property being collectively referred to as the "Leased Real Property"), and any and all assignable warranties of third parties with respect thereto; (3) all machinery, equipment (including office equipment and machines), tools, computers, telephones and telephone systems, parts, accessories, and the like and any and all assignable warranties of third parties with respect thereto (the "Equipment"); (4) all of the contracts, personal property leases, warranties, commitments, agreements, arrangements, and credit guaranties, whether oral or written, pursuant to which Seller enjoys any right or benefit or undertakes any liability or obligation, together with the right to receive income in respect of such contracts, leases, warranties, commitments, agreements, and arrangements on and after the "Closing Date" (as defined below) (the "Assigned Contracts"); (5) all rights of Seller pursuant to engagement letters, contracts, agreements or otherwise, whether written or oral, to perform searches on behalf of clients or prospective clients, together with all rights of Seller against clients to collect fees for work-in-process billed after the Closing Date, excluding those items of work-in-process which are specifically designated in writing by the parties hereto as Excluded Assets (as defined below) (the "Work-in-Process"); (6) all designs, trademarks, trade names, trade styles, service marks, and copyrights; all registrations and applications therefor, both registered and unregistered, foreign and domestic; all trade secrets or processes; all confidential or proprietary information; and all computer software and any modifications thereof, both source and object code, together with all documentation, manuals, flow charts and logic diagrams related thereto, all to the extent either owned or licensed by Seller (the "Intellectual Property"); (7) all data and data bases, correspondence, business plans and projections, client lists, client records, historical personnel records of each of the employees of 2 7 Seller, manuals and printed instructions related to the Assets and the Business, and all other books, records, files and papers of Seller relating to the Assets and to the operation of the Business (the "Books and Records"); (8) to the extent permitted under applicable law or regulation, all licenses, permits, certificates, and governmental authorizations of Seller (the "Permits"); (9) all fixtures and leasehold improvements owned by Seller and located at or on the Leased Real Property and any and all assignable warranties covering such fixtures and leasehold improvements, owned by Seller (the "Fixtures"), and all furniture and furnishings other than Fixtures and any and all assignable warranties covering such furniture and furnishings (the "Furniture"); and (10) all causes of action, claims and demands of Seller related to other Assets (the "Assigned Claims"). (c) Excluded Assets. The Assets being purchased and sold hereunder shall not include the items identified on EXHIBIT A to this Agreement (collectively, the "Excluded Assets"). (d) Procedure for Closing. (i) The closing of the transactions contemplated by this Agreement (the "Closing") shall be held on January 2, 1998 commencing at 9:00 a.m., at the offices of Greene, Radovsky, Maloney & Share LLP, Four Embarcadero Center, Suite 4000, San Francisco, California 94111-4100, or at such other place or time as the parties to this Agreement may agree (the "Closing Date"). (ii) At the Closing, in accordance with the terms of this Agreement, the Seller shall deliver to the Purchaser a bill or bills of sale, assignments and all other documents or instruments necessary or appropriate in the opinion of counsel to the Purchaser to convey all right, title and interest in or to the Assets to the Purchaser and to effectuate the terms of this Agreement, and the Purchaser shall deliver the consideration for the purchase of the Assets as provided in Section 2 of this Agreement. (e) Closing Costs. The Seller shall be responsible for and shall pay all the fees, taxes (including sales taxes), expenses and other costs, including any documentary or intangible taxes or stamps, on any documents required to effect transfer of title to the Assets, or any other item or amount required to be paid on account of or in connection with the transfer of title to the Assets to the Seller pursuant to this Agreement, excluding the payment of any legal and accounting fees of the Purchaser and any State of Florida documentary stamp taxes due and payable upon the issuance of the Note (as defined below). 3 8 2. PURCHASE PRICE; ASSUMPTION OF LIABILITIES. (a) Purchase Price. In consideration of the purchase, sale, conveyance, transfer and delivery of the Assets, and upon the terms and subject to the conditions of this Agreement, the Purchaser shall pay to the Seller at the Closing the sum of Three Million Dollars ($3,000,000), plus the Tangible Book Value of the Assets (as defined below)(the "Purchase Price"). (b) Payment of Purchase Price. The Purchase Price shall be paid at the Closing, as follows: (i) One Million Two Hundred and Fifty Thousand Dollars ($1,250,000), plus the Tangible Book Value of the Assets (as defined below), shall be paid in cash, by wire transfer or check; (ii) One Million Two Hundred and Fifty Thousand Dollars ($1,250,000) shall be paid in the form of a note (the "Note"), the principal balance of which shall be payable in three equal annual installments of $416,667 each, bearing interest payable annually at the rate of 6.75% on the unpaid principal balance thereof, and the unpaid principal balance and accrued interest of which shall be convertible at the election of the Stockholder on each of the first three anniversary dates of its delivery, into common stock of Purchaser (the "LAI Stock"), at the following conversion prices: (1) on the first anniversary date, if the Stockholder elects to convert the Note, the unpaid principal balance and accrued interest then due thereon shall be converted into a number of shares of LAI Stock which shall be equal in value (as hereinafter determined) to the unpaid principal balance and accrued interest then due, and the LAI Stock shall be valued for this purpose at One Hundred and Fifteen Percent (115%) of its fair market value (defined as the average of the closing price of LAI common stock as reported by the NASDAQ National Market System for the ten trading days immediately preceding the Closing Date); (2) on the second anniversary date, if the Stockholder elects to convert the Note, the unpaid principal balance and accrued interest thereon then due shall be converted into a number of shares of LAI Stock which shall be equal in value (as hereinafter determined) to the unpaid principal balance and accrued interest then due, and the LAI Stock shall be valued for this purpose at One Hundred and Thirty-two Percent (132%) of its fair market value (defined as the average of the closing price of LAI common stock as reported by the NASDAQ National Market System for the ten trading days immediately preceding the Closing Date); and (3) on the third anniversary date, if the Stockholder elects to convert the Note, the unpaid principal balance and accrued interest thereon then due shall be converted into a number of shares of LAI Stock which shall be equal in value (as hereinafter determined) to the unpaid principal balance and accrued interest then due, and the LAI Stock shall be valued for this purpose at One Hundred and Fifty-two Percent (152%) of its fair market value (defined as the average of the closing price of LAI common stock as reported by the NASDAQ National Market System for the ten trading days immediately preceding the Closing Date). 4 9 (iii) Five Hundred Thousand Dollars ($500,000) shall be paid in LAI Stock, which shall be valued for this purpose at fair market value (defined as the average of the closing price of LAI common stock as reported by the NASDAQ National Market System for the ten trading days immediately preceding the Closing Date). (c) Legend on Note. The Note shall be substantially in the form of EXHIBIT A(1) hereto and shall be imprinted with a legend substantially in the following form: The payment of principal and interest on this Note is subject to certain recoupment provisions set forth in an Asset Purchase Agreement dated December __, 1997 (the "Agreement") among the issuer of this Note, the person to whom this Note originally was issued, and certain other persons. This Note was originally issued on January __, 1998, and has not been registered under the Securities Act of 1933, as amended. The issuer of this Note will furnish a copy of these provisions to the holder hereof without charge upon written request. (d) Acceleration of Note. In the event that the Stockholder is terminated by the Purchaser without good cause as defined in the Employment Agreement between the Purchaser and the Stockholder referred to in Section 7(b) hereof, the Note shall become immediately due and payable in full on the date of such termination. The Note shall also become immediately due and payable in full on the death of the Stockholder. (e) Tangible Book Value; Proration of Certain Expenses. The phrase "Tangible Book Value of the Assets" for purposes of this Section 2 shall mean the net book value of the tangible Assets being purchased hereunder as shown on the Seller's October 31, 1997 balance sheet: $126,484.98. All expenses and charges related to the Business, including all expenses and charges falling under the categories specified in the Seller's Profit and Loss Statement for the period ended October 31, 1997 and attached hereto as Exhibit H, shall be prorated as of the Closing Date. Purchaser shall bear all such expenses from and after the Closing Date. The parties shall use their best efforts to have all contracts and accounts related to the Business assigned to the Purchaser and to have the Seller and Stockholder released from obligations thereunder at the Closing Date or promptly thereafter. (f) Assumption of Liabilities. At the Closing, as additional consideration for the sale, conveyance, transfer and delivery of the Assets, the Purchaser shall assume and become obligated for, commencing and effective from the Closing Date, the Assumed Liabilities, but shall not and does not assume any Excluded Liabilities. The assumption of the Assumed Liabilities will occur only to the extent that the Assumed Liabilities are current according to their terms as of the Closing Date and monthly payments thereunder do not materially exceed in amount those amounts estimated on EXHIBIT B hereto, and that, after such assumption, such liabilities are on terms and subject to conditions no less favorable to the Purchaser than the terms and conditions thereof as of the date of this Agreement. The Excluded Liabilities shall remain the sole obligation of the Seller. For purposes of this Agreement, the Term "Assumed Liabilities" shall mean the liabilities set forth on EXHIBIT B to this Agreement, and the "Excluded Liabilities" shall mean all liabilities and obligations of the Seller other than the Assumed Liabilities. 5 10 (g) Allocation of Purchase Price. The Purchaser and the Seller agree that the Purchase Price shall be allocated among the Assets in such manner as the parties shall agree, as set forth on EXHIBIT C hereto. Neither party will take a position contrary to such Exhibit for state or federal income tax purposes except to the extent required by Section 1060 of the Internal Revenue Code of 1986, as amended. 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDER. The Seller and the Stockholder hereby jointly and severally represent and warrant to the Purchaser the following: (a) Organization and Standing. The Seller is a corporation duly organized, validly existing and in active status under the laws of the State of California, and has the corporate power and authority to carry on its business as it is now being conducted. The Seller is subject to no material liability, and will not become subject to any material liability, by reason of its failure to qualify to do business as a foreign corporation in any state. The Seller has no subsidiaries. (b) Stock Ownership. The Stockholder owns 100% of the outstanding capital stock of the Seller. (c) Authority Relative to this Agreement. The execution, delivery and performance of this Agreement by the Seller have been duly authorized by the Board of Directors of the Seller and by the Stockholder. No further corporate or other action is necessary on their part to make this Agreement valid and binding upon the Seller or upon the Stockholder and enforceable against each of them in accordance with the terms hereof or to carry out the transactions contemplated hereby, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, and other laws and equitable principles relating to or limiting creditors' right generally and by general principles of equity. (d) No Violations. The execution, delivery and performance of this Agreement by the Seller and the Stockholder do not and will not: (i) constitute a breach or a violation of the Seller's Articles of Incorporation or by-laws, or of any material law, rule or regulation, agreement, indenture, deed of trust, mortgage, loan agreement or other material instrument to which the Seller or the Stockholder is a party or by which either of them is bound; (ii) constitute a violation of any material order, judgment or decree to which the Seller or the Stockholder is bound or by which any of the Seller's assets or properties are bound or affected; or (iii) result in the creation of any material lien, charge or encumbrance upon any of the Seller's assets or properties. (e) Compliance with Agreements. The Seller is not a party to any agreement, indenture, deed of trust, instrument, judgment, order, obligation or decree which materially and adversely affects the Business or the Assets. The Seller is not in default under any agreement, indenture, deed of trust or other instrument to which it is a party or by which it may be bound, nor is it in violation of any applicable law or regulation, ordinance, order, injunction, decree or 6 11 requirement of any governmental body or court which might materially and adversely affect the Business or the Assets. (f) Tax Matters. The Seller has prepared and filed all federal, state and local tax returns and reports as are or have been required to be filed, all taxes owed (whether or not shown on any tax return) have been timely paid in full, and all such tax returns and reports filed are true, correct, complete and accurate in all material respects. The Seller has not executed or filed with the Internal Revenue Service or any other taxing authority any agreement extending the period for assessment or collection of any income or other taxes, and the Seller is not a party to any pending audit examination, deficiency, or other action or proceeding by any governmental authority for assessment or collection of taxes, and no claim for assessment or collection of taxes has been asserted against the Seller. No accrued and unpaid taxes of any kind exist, and no formal claims have been made or asserted by the United States Government or by any state or foreign country or local government for income or any other taxes, except such as have been paid or (whether or not disputed) are disclosed pursuant to this Agreement. True and complete copies of all federal, state and local tax returns filed by the Seller during the past five years have previously been delivered to the Purchaser. Adequate provision for any taxes (including any deferred taxes) due or to become due for the Seller through October 31, 1997 has been made and is reflected on the financial statements included on EXHIBIT H hereto. All taxes which the Seller is required by law to withhold or collect for payment have been duly withheld and collected, and have been paid to the proper governmental authority or are being withheld by the Seller. The Seller is in compliance with, and its records contain all information and documents necessary to comply with, all applicable information reporting and tax withholding requirements under federal, state and local law. There are no liens with respect to taxes upon any of the Assets. (g) Litigation. The Seller is not a party to any litigation, proceeding or administrative investigation and none is pending or, to the knowledge of the Seller or the Stockholder, threatened against the Seller, its properties, or any property used in its business or any of the Assets, and, to the knowledge of the Seller or the Stockholder, other than the letter dated December 15, 1997 from Craig J. Zinda of First American Real Estate Information Services, Inc. to Glen S. Corso, there is no basis for any such litigation, proceeding or investigation which might have a material adverse effect, financial or otherwise, on the Seller, its business, property, operations or prospects, or any of the Assets. There is no outstanding material order, writ, injunction or decree of any court, government, governmental authority or arbitration against or affecting the Seller, its properties or business, or any of the Assets. (h) Title to and Condition of Assets. The Seller has good and marketable title to all of the Assets, except the Assigned Contracts. The Assets are subject to no guaranty, judgment, execution, pledge, lien, conditional sales agreement, security agreement, encumbrance or charge, or other liability (whether accrued, absolute, contingent or otherwise) which would have a material adverse effect, financial or otherwise, on the Seller, its business, property, operations or prospects, or any of the Assets, other than as disclosed in this Agreement and in the Exhibits hereto, whether or not such liabilities are customarily reflected in a corporate balance sheet prepared in accordance with generally accepted accounting principles. In addition, to the knowledge of the Seller or the Stockholder, there are no facts in existence on the date hereof that might reasonably serve as the 7 12 basis now in or in the future for the Assets becoming subject to any such liability or obligation. The Assets that constitute tangible property are in good condition and repair, ordinary wear and tear excepted, are in the possession of the Seller, and are operated in conformity with all applicable laws, ordinances and regulations. (i) Client List; Engagement Letters. A list of all of the existing clients of the Seller as of the date of this Agreement, certified by the Seller and the Stockholder as true, complete and correct, has been delivered to the Purchaser prior to the execution of this Agreement (the "Client List"). An updated certified Client List shall be delivered to the Purchaser on the Closing Date. True and correct copies of all engagement letters of the Seller for searches which are or will be in progress on the Effective Date and prior to the Closing Date have been delivered to the Purchaser prior to the execution of this Agreement, (or, if entered into between the date of this Agreement and the Closing Date, will be delivered to the Purchaser on the Closing Date). The Seller and the Stockholder will take all reasonable and necessary steps to ensure that a good relationship is maintained with each of its clients or prospective clients after the Effective Date, whether or not listed on the Client List, and will also take all reasonable and necessary steps to encourage its clients and prospective clients to do business with Purchaser after the Closing Date. Neither the Seller nor the Stockholder make any representation or warranty as to the assignability of the engagement letters or their enforceability following the consummation of the transactions contemplated hereby, or as to whether the client will make payments thereunder. (j) Real Property Leases. Attached hereto as EXHIBIT D is a true and correct list of all Leased Real Property. True and correct copies of all Real Property Leases have been delivered to the Purchaser prior to the execution of this Agreement. Each Real Property Lease is in full force and effect and there is no existing default or event of default, real or claimed, or event which with notice or lapse of time or both would constitute default thereunder the enforcement of which would materially adversely affect the Assets or the Business. Except as described on EXHIBIT D, the assignment of any Real Property Lease does not require the consent of the lessor thereunder, and such assignment will not cause a breach, default, or event of default thereunder. (k) Customers/Clients. Except as disclosed to the Purchaser in writing on or before the Closing Date, to the knowledge of the Seller or the Stockholder, there has been no termination, cancellation or material limitation, modification or change since October 31, 1997 in the business relationship of the Seller with any client. (l) Employees. To the knowledge of the Seller or the Stockholder, no executive, key employee, or group of employees has any plans to terminate employment with the Seller prior to the Closing Date, or to decline to accept any offer of employment made by the Purchaser on or after the Closing Date. Notwithstanding the foregoing, the Seller and the Stockholder believe that some executives believe that they have insufficient information to make a decision with respect to any offer of employment by the Purchaser, and may make plans not to accept any such offer. (m) Employee Benefits. EXHIBIT E hereto contains a true and complete list of all the following agreements, plans or other arrangements, covering any employee of the Seller, which are presently in effect or were in effect at any time prior to the Closing Date: (i) employee benefit 8 13 plans within the meaning of ERISA Section 3(3); and (ii) any other employee benefit plan, program, policy or arrangement, whether written or unwritten, formal or informal, which Seller has maintained, currently maintains, or to which it has any outstanding present or future obligations to contribute or other liability, whether voluntary, contingent or otherwise (collectively, the "Employee Benefit Plans"). The Assets are not, and Seller does not reasonably expect them to become, subject to a lien imposed under ERISA Section 4068. Seller never has had and currently has no obligation to contribute to any multi-employer plan, as defined in ERISA Section 3(37), with respect to the Business. Seller has not completely or partially withdrawn from any multi-employer plan, within the meaning of ERISA Section 3(37). The Business has not suffered a seventy percent decline in "contribution base units," within the meaning of ERISA Section 4205(b)(1)(A), in any plan year beginning after 1979. There are no actions, audits or claims pending or, to the knowledge of the Seller or the Stockholder, threatened against the Assets or the Business with respect to the Business's maintenance of the Employee Benefit Plans, other than routine claims for benefits. Seller has complied with any applicable continuation coverage requirements of Section 1001 of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608 ("COBRA"). The Purchaser has no COBRA obligation, or obligation under any state statute of similar import, with respect to current or former employees, and the Seller and the Stockholder promise to indemnify the Purchaser and hold it harmless for any costs or expenses relating to any allegations or findings of liability with respect to such current or former employees for "qualifying events" (as defined in Section 4980 B(f)(3) of the Internal Revenue Code) occurring on or before the date such individual becomes a participant in the Purchaser's group health plans. (n) Owned Personal Property. EXHIBIT F contains a true and correct list and a brief description of all Equipment owned by Seller and included in the Assets (excluding items of equipment having a fair market or net book value of less than $5,000). The Equipment is and at Closing will be in good operating condition (normal wear and tear excepted). EXHIBIT F contains a true and correct list and a brief description of all Furniture, Fixtures and other items of tangible personal property (excluding items of Furniture, Fixtures and other personal property owned by Seller and having a fair market or net book value of less than $5,000) owned by Seller and included in the Assets. The Furniture, Fixtures and other items of tangible personal property included in the Assets are and at Closing will be in good operating condition (normal wear and tear excepted). (o) Leased Personal Property. EXHIBIT G contains a true and correct list and brief description of all items of tangible personal property leased by Seller. True, correct and complete copies of all documents evidencing the leases described on EXHIBIT G are attached hereto. Each of the leases described on EXHIBIT G is now, and will be on the Closing Date, in full force and effect and there are not now, and will not be on the Closing Date, any existing defaults or events of default, real or claimed, or events which with notice or lapse of time or both would constitute defaults, the consequence of which would have a material adverse effect on the Assets or the Business. Except as shown on EXHIBIT G, all such leases are fully assignable without the consent of any third party, and such assignment will not cause a breach, default, or event of default thereunder. (p) Financial Statements. Attached to this Agreement as EXHIBIT H are financial statements of the Seller for the years ended December 31, 1994, 1995 and 1996, and for the ten 9 14 month period ended October 31, 1997, which statements: (i) include the Seller's balance sheet as of December 31, 1994, 1995 and 1996, and as of October 31, 1997, and income statement for the years ended December 31, 1994, 1995 and 1996 and the ten month period ended October 31, 1997; (ii) are in accordance with the books and records of the Seller; (iii) are true and accurate statements and fairly set forth the financial condition and results of operations of the Seller as of the dates thereof; (iv) have been prepared in accordance with generally accepted accounting principles, applied on a consistent basis except as set forth on EXHIBIT H; and (v) contain and reflect all necessary adjustments for a fair presentation of the financial condition and results of operations for the periods covered by the statements. (q) Insurance. EXHIBIT I contains a true, complete and correct list of all insurance policies maintained by Seller and Stockholder in connection with the Business, including, but not limited to, professional malpractice, life, casualty, fire, general liability, employers' liability, title, business interruption, errors and omissions, and all other forms of insurance, in each case indicating the insurer and the amount, scope and coverage of such policies (effective dates, deductibles, and any aggregate limits). All such policies are in full force and effect, and all premiums payable pursuant thereto for all periods up to and including the Closing Date have been or will be fully paid by the Seller. The Seller has not received any notice from any insurance carrier or otherwise that (i) such insurance will be cancelled or terminated or that coverage thereunder will be reduced or eliminated, or (ii) premium costs will be substantially increased. Except as disclosed on EXHIBIT I, there are no claims pending under such policies of insurance and no notices have been given by the Seller under such policies. (r) Absence of Certain Changes or Events. Other than as disclosed in exhibits to this Agreement and in the ordinary course of its business or in connection with effecting the transactions contemplated by this Agreement, and other than bonus payments or dividends made to certain employees of the Seller, a schedule of which bonus payments has been provided to the Purchaser prior to the execution of this Agreement, since October 31, 1997, there has not been (i) any material adverse change in the financial condition, Assets or results of operations of the Business; or (ii) any damage, destruction or loss, whether or not covered by insurance, materially adversely affecting the Assets or the Business. (s) Compliance With Applicable Laws. The conduct of its business by the Seller and the Closing of the transactions contemplated by this Agreement do not violate or infringe any federal, state, local or foreign law, statute, ordinance, license or regulation that is presently in effect or that to the knowledge of the Seller or the Stockholder is proposed to be adopted (including, without limitation, laws relating to environmental liability) that would materially and adversely affect the Business or the Assets. Such conduct and Closing do not violate or infringe any right or concession, copyright, trademark, trade name, patent, know-how or other proprietary right of others, the enforcement of which would materially and adversely affect the Business or the value of the Assets. The Seller has and has maintained all material licenses and permits required by all local, state and federal authorities and regulating bodies. (t) Approvals and Consents. Except as set forth on EXHIBIT J, no consent, approval or authorization is required in connection with the execution or delivery of this Agreement 10 15 by the Seller and the Stockholder or the consummation by either of them of the transactions contemplated hereby. (u) Disclosure. No representation or warranty made by the Seller or the Stockholder in this Agreement, the exhibits hereto or any of the documents and papers required to be delivered pursuant to this Agreement or in connection with the consummation of the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. (v) No Undisclosed Changes. The representations and warranties made by the Seller and the Stockholder pursuant to this Section 3 of this Agreement are and will be true and complete as of not only the date of this Agreement, but also as though again made on the Closing Date, except to the extent that such representations and warranties are incorrect as of such later date by reason of events occurring after the date of this Agreement in compliance with the terms hereof. (w) Investment Representations. Seller (i) understands that the Note and the LAI Stock acquired by it as part of the Purchase Price pursuant to this Agreement have not been, and will not be, registered under the Securities Act of 1933 or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, (ii) is acquiring the Note and the LAI Stock solely for its own account for investment purposes, and not with a view to the distribution thereof (except to the Stockholder), (iii) is a sophisticated investor with knowledge and experience in business and financial matters, (iv) has received certain information concerning the Purchaser and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in investing in the Note and the LAI Stock, (v) is able to bear the economic risk and lack of liquidity inherent in holding the Note and the LAI Stock, (vi) is an Accredited Investor as defined in the Securities Act of 1933 and the rules and regulations promulgated thereunder, and (vii) is aware that all shares of the LAI Stock acquired as part of the Purchase Price will be subject to the Lock-Up Agreement (as hereinafter defined). 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents and warrants the following: (a) Organization and Standing. The Purchaser is a corporation duly organized, validly existing, and in active status under the laws of the State of Florida, and has the corporate power and authority to carry on its business as it is now being conducted. The Purchaser is subject to no material liability, and will not become subject to any material liability, by reason of its failure to qualify to do business as a foreign corporation in any state. (b) Authority Relative to this Agreement. The execution, delivery and performance of this Agreement and the transactions contemplated hereby by the Purchaser have been duly authorized by the Board of Directors of the Purchaser. No further corporate or other action is necessary on the part of the Purchaser to make this Agreement valid and binding upon the Purchaser 11 16 and enforceable against it in accordance with the terms hereof or to carry out the transactions contemplated hereby, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, and other laws and equitable principles relating to or limiting creditors' right generally and by general principles of equity. (c) No Violations. Except with respect to the Purchaser's existing credit arrangements with Barnett Bank, N.A., the execution, delivery and performance of this Agreement by the Purchaser do not and will not: (i) constitute a breach or a violation of the Purchaser's Articles of Incorporation or by-laws, or of any material law, rule or regulation, agreement, indenture, deed of trust, mortgage, loan agreement or other material instrument to which the Purchaser is a party or by which it is bound; (ii) constitute a violation of any material order, judgment or decree to which the Purchaser is bound or by which any of the Purchaser's assets or properties are bound or affected; or (iii) result in the creation of any lien, charge or encumbrance upon any of the Purchaser's assets or properties. (d) LAI Stock. Upon the delivery of the LAI Stock and any of the Purchaser's stock issued pursuant to the Note to the Seller, the Seller will acquire good and marketable title to such Stock, free and clear of any liens, encumbrances, or restrictions, except as imposed by law or contemplated by this Agreement, and the shares of such Stock, when issued in accordance with the provisions of this Agreement, will be fully paid and nonassessable. Upon the delivery of the Note to the Seller, the Seller will acquire good and marketable title to the Note, free and clear of any liens, encumbrances, or restrictions, except as imposed by law or contemplated by this Agreement. (e) Financial Statements. The financial statements that are included as part of the Purchaser's Form 10-Q filed for the quarter ended August 31, 1997, (the Financial Statements") were prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, were prepared in accordance with the books and records of the Purchaser and present fairly the financial position of the Purchaser as of the respective dates thereof and the results of operations of Purchaser for the respective periods then ended. (f) Compliance with Agreements. The Purchaser is not a party to any agreement, indenture, deed of trust, instrument, judgment, order, obligation or decree which materially and adversely affects its business or its assets. The Purchaser is not in default under any agreement, indenture, deed of trust or other instrument to which it is a party or by which it may be bound, nor is it in violation of any applicable law or regulation, ordinance, order, injunction, decree or requirement of any governmental body or court which might materially and adversely affect its business or its assets. (g) Compliance With Applicable Laws. The conduct of its business by the Purchaser and the Closing of the transactions contemplated by this Agreement do not violate or infringe any federal, state, local or foreign law, statute, ordinance, license or regulation that is presently in effect or that to the knowledge of the Purchaser is proposed to be adopted (including, without limitation, laws relating to environmental liability) and that would materially and adversely affect its business or its assets. Such conduct and Closing do not violate or infringe any right or concession, copyright, trademark, trade name, patent, know-how or other proprietary right of others, 12 17 the enforcement of which would materially and adversely affect the business or the assets of the Purchaser. The Purchaser has and has maintained all material licenses and permits required by all local, state and federal authorities and regulating bodies. (h) Nasdaq. The LAI Stock shall be listed for quotation on Nasdaq effective upon the Closing. (i) Disclosure. No representation or warranty made by the Purchaser in this Agreement, the exhibits hereto or any of the documents and papers required to be delivered pursuant to this Agreement or in connection with the consummation of the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. 5. DUE DILIGENCE INVESTIGATION. Between the Effective Date and the Closing Date, the Seller and the Stockholder shall (i) give to the Purchaser's designated representatives full and complete access, from time to time, during normal business hours, and upon reasonable advance notice, to the Seller's business offices, premises, books, records and business information, (ii) permit the Purchaser's designated representatives to make such examinations of the foregoing, and conduct such other investigations, as they consider appropriate to determine and verify the condition (financial or otherwise) of the Business and the Assets and to consummate the transactions contemplated by this Agreement, and (iii) furnish to the Purchaser's designated representatives such additional information with respect to the Business and the Assets as they may reasonably request from time to time. 6. TRANSACTIONS PENDING CLOSING. (a) Business in the Ordinary Course. Except as otherwise expressly required or permitted by this Agreement and except as otherwise authorized or approved by the Purchaser between the Effective Date and the Closing Date, the Stockholder and the Seller agree that the Seller shall conduct the Business in the ordinary course and shall (i) use reasonable efforts to maintain and preserve the Business and the Assets intact, to keep available the services of its present employees and to preserve the goodwill of clients, customers and others having business relations with it; (ii) meet all obligations of the Seller under each agreement assigned hereunder; (iii) keep in force at no less than their present limits all existing policies of insurance; and (iv) bill all of the clients of the Seller in accordance with the terms of any engagement letters applicable to them and consistent with the past practices of the Seller. (b) Notification of Change. The Seller and the Stockholder will each immediately notify the Purchaser, in writing, of any event or condition known to either Seller or the Stockholder which occurs prior to Closing hereunder and causes a change in the facts relating to, or the truth of any of the representations set forth in Section 3 of this Agreement or that otherwise adversely affects or that is reasonably likely to affect the Assets or the operation of the Business. Between the date of this Agreement and the Closing, the Seller and the Stockholder will promptly advise the Purchaser 13 18 in writing of any fact which, if existing or known at the date of this Agreement, would have been required to be set forth in or disclosed pursuant to this Agreement. (c) Corporate Action; Approvals and Consents. The Seller and the Stockholder will each take all corporate and other action and use their best efforts to obtain in writing as promptly as possible all approvals and consents required to be obtained by any of them in order to effectuate the consummation of the transactions contemplated hereby. (d) Other Transactions Prohibited. Between the date of this Agreement and the Closing, neither the Stockholder, the Seller nor any of its officers, directors, employees or stockholders will enter into any negotiations or agreements with any person or entity other than the Purchaser with respect to the sale of all or any part of the Assets or the sale of all or any portion of the capital stock of the Seller. (e) Disclosure of Transactions. From and after the date of this Agreement and regardless of whether or not the transactions contemplated by this Agreement are ever consummated, all of the parties to this Agreement, and their respective agents, employees, contractors and representatives, shall treat as confidential all information with respect to the Purchase Price and all other material terms and conditions of the transactions contemplated by this Agreement (collectively the "Price and Terms"), and shall not make, or permit to be made, any public announcement or other disclosure whatsoever of the Price and Terms (except as such disclosure may be compelled by law) without the prior consent of all other parties. 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER. The obligations of the Purchaser under this Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (the fulfillment of any of which may be waived in writing by the Purchaser): (a) Accuracy of Representations and Warranties. Each of the representations, warranties and statements of the Seller and the Stockholder contained in this Agreement, all exhibits hereto and any documents delivered in connection herewith shall not only have been true and complete as of the date of this Agreement but shall also be true and complete in all material respects as though again made on the Closing Date, except (i) to the extent that such representations and warranties and statements are incorrect as of such later date by reason of events occurring after the date of this Agreement in compliance with the terms hereof or (ii) to the extent that such inaccuracies do not, in the aggregate, constitute a material adverse change in the Assets or the Business or the results of operations of the Seller. (b) Employment Agreement. The Stockholder shall have entered into an Employment Agreement with the Purchaser, substantially in the form of that Employment Agreement attached hereto as EXHIBIT K (the "Employment Agreement"). 14 19 (c) Lock-Up Agreement. The Seller and the Stockholder shall have entered into a Lock-Up Agreement with respect to the LAI Stock received as part of the Purchase Price, substantially in the form of that Lock-Up Agreement attached hereto as EXHIBIT L, containing certain restrictions on the ability of the Seller and the Stockholder to sell, convey, assign or otherwise transfer the LAI Stock (the "Lock-Up Agreement"). The Lock-Up Agreement shall provide, in pertinent part, that the Stockholder shall not, for a period of two (2) years after the Closing Date, directly or indirectly, offer, sell, transfer, pledge, contract to sell or otherwise dispose of, or cause or in any way permit to be offered, sold, transferred, pledged or otherwise disposed of, or grant any options, warrants or other rights to acquire, any shares of the LAI Stock owned by the Stockholder as of the Closing Date. The Lock-Up Agreement shall terminate in the event of the death, permanent disability or termination without good cause of the Stockholder as defined in the Employment Agreement. (d) Barnett Consent. The Purchaser shall have received the consent of Barnett Bank, N.A. to the transactions contemplated pursuant to this Agreement; provided, however, that the Purchaser shall use its reasonable best efforts to obtain that consent. (e) Compliance. The Seller and the Stockholder shall each have performed and complied with all agreements, covenants and conditions required by this Agreement and all exhibits hereto to be performed and complied with by each of them at or prior to the Closing. (f) No Material Adverse Change Prior to Closing. Seller shall not have suffered any material adverse change in the Assets or the Business or the results of operation thereof, nor shall there have occurred any event that has had or is reasonably expected to have a materially adverse effect on the Assets or the Business or the results of operation thereof. (g) Consents and Waivers. Purchaser shall have received any required consents or waivers for the consummation of the transactions described herein. (h) Active Status Certificate; Certified Copy of Articles. The Purchaser shall have received a certificate executed by the Secretary of State of the State of California dated within 14 days prior to the Closing Date certifying that the Seller is a corporation in active status under the laws of the State of California and a certificate executed by the Secretary of State of the State of California dated within 14 days prior to the Closing Date certifying to a true and complete copy of the Seller's Articles of Incorporation. (i) Certificate. The Purchaser shall have received a certificate executed by the President of the Seller, attested to by the Secretary of such corporation under its corporate seal, and executed by the Stockholder, dated the Closing Date, satisfactory in form and substance to the Purchaser and its counsel, certifying as to: (i) the fulfillment of the matters set forth in Sections 7(a) through (g) of this Agreement, 15 20 (ii) the resolutions adopted by the Board of Directors of the Seller and the Stockholder approving the execution of this Agreement and the consummation of the transactions contemplated hereby; and (iii) the incumbent officers of the Seller and the authenticity of the signatures of each. (j) Instruments of Transfer. The Seller shall have delivered to the Purchaser such bills of sale, endorsements, assignments, licenses and other good and sufficient instruments of conveyance and transfer and any other instruments reasonably necessary or appropriate to vest in the Purchaser all of the Seller's right, title and interest in and to the Assets, free and clear of all liens, charges, encumbrances, pledges or claims of any nature which would have a material adverse effect on the Business all in form and substance satisfactory to counsel to the Purchaser. (k) Opinion of Seller's Counsel. The Purchaser shall have received an opinion of Greene Radovsky Maloney & Share LLP, counsel to the Seller, dated the Closing Date, satisfactory in form and substance to the Purchaser and its counsel, to the effect of that set forth in EXHIBIT M. (l) Litigation. There shall not be any litigation or proceeding to restrain or invalidate the consummation of the transactions contemplated hereby, the defense of which would, in the sole discretion of the Purchaser, involve expense to the Purchaser or a lapse of time that would be materially adverse to its interests with respect hereto. (m) Casualty. Since the date of this Agreement, and prior to the completion of the Closing on the Closing Date, no material portion of the Assets shall have been destroyed or damaged (whether or not there exists insurance against such loss). (n) Termination of Financing Statements. No financing statements shall be of record with any state or any subdivision thereof, or in the public records of any county thereof, with respect to any of the Assets which shall have a material adverse effect on the value of the Assets. The Seller shall have furnished evidence satisfactory to counsel to the Purchaser of the termination of any financing statements previously on record with respect to any of the Assets, but if any such financing statements shall be of record with any state or any subdivision thereof or of any other state or in the public records of any county thereof, with respect to the Assets (whether or not such financing statements have a material adverse effect on the value of the Assets), the Seller shall deliver termination statements, releases or other documents satisfactory to counsel to the Purchaser which will be effective upon recording or filing to terminate or release all such filings of record with respect to the Assets. (o) Actions, Proceedings, Etc. All actions, proceedings, instruments, agreements and documents required to carry out the transactions contemplated by this Agreement or incidental thereto and all other related legal matters shall have been reasonably satisfactory to and approved by Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, Professional Association, counsel to the 16 21 Purchaser; and, such counsel shall have been furnished with such copies (certified if requested) of all such actions, proceedings, instruments, agreements and documents as they shall have reasonably requested. 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER AND THE STOCKHOLDER. The obligations of the Seller and the Stockholder under this Agreement are subject to the satisfaction at or prior to the Closing of each of the following conditions (the fulfillment of any one of which may be waived in writing by such parties): (a) Accuracy of Representations and Warranties. The representations and warranties and statements of the Purchaser contained in this Agreement shall not only have been true and complete on the date of this Agreement and when made but shall also be true and complete as though again made on the Closing Date, except to the extent that they are incorrect as of the Closing Date by reason of events occurring after the date of this Agreement in compliance with the terms hereof. (b) Compliance. The Purchaser shall have performed and complied with all agreements, covenants and conditions required by this Agreement and all exhibits hereto to be performed and complied with by it at or prior to the Closing. (c) Certificate of the Purchaser. The Seller shall have received a certificate exe cuted by the President of the Purchaser and attested to by its Secretary under its corporate seal, dated the Closing Date, certifying as to: (i) the fulfillment of the matters mentioned in Sections 8(a) and (b) of this Agreement; (ii) the resolutions adopted by the Board of Directors of the Purchaser approving the execution of this Agreement and the consummation of the transactions con templated hereby; and (iii) the incumbent officers of the Purchaser and the authenticity of the signatures of each. (d) Employment Agreement. The Purchaser shall have entered into an Employment Agreement with the Stockholder, substantially in the form of the Employment Agreement attached hereto as EXHIBIT K (the "Employment Agreement). (e) Opinion of Purchaser's Counsel. The Seller shall have received an opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A., counsel to the Purchaser, dated the Closing Date, satisfactory in form and substance to the Seller and its counsel. 17 22 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES, OBLIGATIONS, COVENANTS AND AGREEMENTS. Each of the representations, warranties, obligations, covenants and agreements of the Seller, the Stockholder and the Purchaser included or provided for in this Agreement or in any Exhibit to this Agreement or in any certificate delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement for a period of eighteen (18) months after the Closing Date, except for (i) the representation and warranty of the Seller and the Stockholder set forth in Sections 3(f) and (m) hereof, which shall survive the Closing Date and continue in full force and effect up to and including the applicable statute of limitations, and (ii) the Restrictive Covenants set forth in Section 12 hereof, which shall survive the Closing Date for the periods set forth therein. 10. INDEMNIFICATION. (a) Indemnifications by the Seller and the Stockholder. The Seller and the Stockholder jointly and severally agree to indemnify and hold harmless the Purchaser in respect of any and all claims, losses and expenses which may be incurred by the Purchaser arising out of: (i) any material breach by either the Seller or the Stockholder of any of the representations, warranties, covenants or agreements made by either of them in this Agreement, the exhibits hereto or any document or paper delivered in connection with the transactions contemplated hereby; (ii) any attempt (whether or not successful) by any person to cause or require the Purchaser to pay or discharge any debt, obligation, liability or commitment of the Seller other than an Assumed Liability; or any action, suit, proceeding, assessment or judgment arising out of or incident to any of the matters indemnified against in this Section 10, including reasonable fees and disbursements of counsel; provided, however, that the Seller and the Stockholder shall not have any obligation to indemnify the Purchaser hereunder: (A) until the Purchaser has suffered claims, losses and expenses arising out of the events set forth in (i) through (iii) above in excess of a $50,000 aggregate deductible, or (B) thereafter to the extent the claims, losses and expenses the Purchaser has suffered arising out of the events set forth in (i) through (iii) above exceeds an aggregate dollar amount equal to Three Million Dollars ($3,000,000). (b) Indemnification by the Purchaser. The Purchaser agrees to indemnify and hold harmless the Seller and the Stockholder in respect of any and all claims, losses and expenses which may be incurred by the Seller or the Stockholder arising out of: (i) any material breach by the Purchaser of any of the representations, warranties, covenants or agreements made by it in this Agreement, the exhibits hereto or any document or paper delivered in connection with the transactions contemplated hereby; 18 23 (ii) any action, suit, proceeding, assessment or judgment arising out of or incident to any of the matters indemnified against in this Section 10, including reasonable fees and disbursements of counsel; provided, however, that the Purchaser shall not have any obligation to indemnify the Seller or the Stockholder hereunder, except as to any of the Assumed Liabilities: (A) until the Seller or the Stockholder have suffered claims, losses and expenses arising out of the events set forth in (i) and (ii) above in excess of a $50,000 aggregate deductible, or (B) thereafter to the extent the claims, losses and expenses the Seller and the Stockholder have suffered arising out of the events set forth in (i) and (ii) above exceeds an aggregate dollar amount equal to Three Million Dollars ($3,000,000). (c) Claims for Indemnification. Whenever any claim shall arise for indemnification under this Section 10, the indemnified party shall notify the party or parties (as the case may be) against whom indemnification is sought (whether one party or more, the "Indemnifying Party") in writing of the facts constituting the basis for such claim. Such notice shall specify all facts known to the indemnified party giving rise to such indemnification right and the amount or an estimate of the amount of the liability arising therefrom. The right to indemnification hereunder and the amount or the estimated amount thereof, as set forth in such notice, shall be deemed agreed to by the Indemnifying Party unless, within 45 days after the receipt of such notice, the Indemnified Party is notified in writing that the Indemnifying Party disputes the right to indemnification as set forth or estimated in such notice. (d) Right to Defend; Third-Party Claims, Etc. (i) If the facts giving rise to any such indemnification right shall involve any actual or threatened claim or demand by any third party against the indemnified party or any possible claim by the indemnified party against any third party, such claim by or against a third party shall be referred to as a "Third-Party Claim." If the Indemnifying Party gives the indemnified party an agreement in writing, in form and substance reasonably satisfactory to counsel to the indemnified party confirming the agreement to indemnify and save the indemnified party harmless from all costs and liability arising from any Third-Party Claim, the Indemnifying Party may at its own expense undertake full responsibility for the defense or prosecution of such Third-Party Claim and may contest or settle it on such terms as it may choose. If the Indemnifying Party fails to deliver such an agreement of indemnity to the indemnified party: (1) the Indemnifying Party at its own expense may nevertheless participate with the indemnified party in the defense or prosecution of the Third-Party Claim and in any and all settlement negotiations relating thereto, and (2) the indemnified party may contest or settle the Third-Party Claim on such terms at it may choose, although the indemnified party shall not reach a settlement until it has consulted in good faith with the Indemnifying Party. Any such participation shall not relieve the Indemnifying Party of its obligations to indemnify the indemnified party under this Section 10. 19 24 (ii) If by reason of any Third-Party Claim a lien, attachment, garnishment or execution is placed upon any of the property or assets of the indemnified party, the Indemnifying Party, if it desires to exercise its right to defend or prosecute such suit, shall furnish a satisfactory indemnity bond to obtain the prompt release of such lien, attachment, garnishment or execution. (e) Cooperation. The parties to this Agreement shall execute such powers of attorney as may be necessary or appropriate to permit participation of counsel selected by any party hereto and, as may reasonably be related to any such claim or action, shall provide access to the counsel, accountants and other representatives of each party during normal business hours to all properties, personnel, books, tax records, contracts, commitments and all other business records of such other party and will furnish to such other party copies of all such documents as may reasonably be requested (certified, if requested). (f) Offset. With respect to any claims by the Purchaser against the Seller or the Stockholder for indemnification under this Section 10, in furtherance and not in limitation of its rights under this Agreement, the Purchaser, at its option, shall be entitled to an immediate right of offset against any amounts owed by the Purchaser to either the Seller or the Stockholder, specifically excluding any payments to be paid to Stockholder as compensation under the Employment Agreement. 11. OBLIGATIONS AFTER THE CLOSING. (a) Distribution of Consideration. The Seller and the Stockholder hereby covenant that on and after the Closing, they shall pay and distribute any and all consideration paid by the Purchaser to the Seller pursuant hereto in accordance with all applicable laws and shall indemnify and hold the Purchaser harmless from any liability arising by virtue of any failure on the part of the Seller or the Stockholder to comply in all respects with this covenant. (b) Transition of Business. The Seller and the Stockholder agree to assist as requested to effect an orderly transition of the Business to the Purchaser. (c) Post Closing Access to Financial Records. There may be circumstances from time to time hereafter, whether in connection with the preparation of historical audited financial statements or otherwise, where the Purchaser may need to have access to the financial records retained by the Seller and/or the Stockholder, or their respective agents, with respect to the Assets or the Business. The Seller and the Stockholder agree to provide to the Purchaser and its counsel, accountants and other representatives full access during normal business hours for inspection of such financial records of the Seller and/or the Stockholder relating to the Assets or the Business as the Purchaser or its counsel or accountants may from time to time reasonably request. (d) Employment of Employees; Benefit Plans. On the Closing Date, Purchaser shall offer employment to such employees of Seller as Purchaser, in its sole discretion, shall deem to be in its best interest. Purchaser will assume no responsibility with regard to any Employee Benefit Plans of Seller. Purchaser agrees to give each employee of Seller hired by Purchaser credit 20 25 for prior years of service with Seller for purposes of participation and vesting in Purchaser's employee benefit plans. Effective at the Closing Date, all employees of Seller hired by Purchaser shall be entitled to participate in Purchaser's employee benefit plans. The Seller will adopt appropriate resolutions of its Board of Directors terminating its Employee Benefit Plans (except for the cafeteria plan) as of the Closing Date (or in the case of its health insurance plan, as of the close of business on the date immediately prior to the Closing Date). If and to the extent that the Seller obtains an appropriate determination letter from the Internal Revenue Service with respect to its money purchase pension plan and 401(k) profit sharing plan, the Seller's former employees who become participants in the Purchaser's profit sharing plan will be entitled to rollover their balances from the Seller's plans to the Purchaser's plan. 12. RESTRICTIVE COVENANTS. (a) Noncompetition. For the period commencing on the Closing Date and continuing through and including the three (3) years following the Closing Date, neither the Seller, the Stockholder, nor any officer or director of the Seller, will, without the prior written consent of the Purchaser, directly or indirectly, enter into, engage in, be employed by or consult with any business in any county in any state in which either the Seller or the Purchaser does or has done business, in competition with the Business, whether as an individual, independent contractor, partner or joint venturer, or as an officer, director, stockholder, agent, employee or salesman for any person, firm, partnership, corporation or other entity. (b) Nonsolicitation of Clients and Employees. For the period commencing on the Closing Date and continuing through and including three (3) years following the Closing Date, the Stockholder shall not, directly or indirectly, either as an individual, partner, officer, director, stockholder, advisor, independent contractor, joint venturer, consultant, agent, employee, representative or salesman for any person, firm, partnership, corporation or other entity, or otherwise, (i) solicit or counsel any third person, partnership, joint venture, company, corporation, association or other organization that is or was a client or prospective client (including any individual who is or was an employee, principal, partner, officer or director of a client or prospective client) of Purchaser or Seller with whom Stockholder had a substantial relationship within the preceding three (3) year period, regardless of such person's or entity's location, to terminate any business relationship with Purchaser and/or to commence a similar business relationship with any other individual or entity; (ii) accept, with or without solicitation, any business from any third person, partnership, joint venture, company, corporation, association or other organization that is or was a client or prospective client (including any individual who is or was an employee, principal, partner, officer or director of a client or prospective client), of Purchaser or Seller with whom Stockholder had a substantial relationship within the preceding three (3) year period, regardless of such person's or entity's location; or (iii) solicit any of the employees, consultants, agents, or independent contractors of Purchaser to terminate any business relationship with Purchaser. The restrictions of this Section 12(b) shall not be violated by the ownership of no more than 2% of the outstanding securities of any company whose stock is traded on a national securities exchange or is quoted in the Automated Quotation System of the National Association of Securities Dealers (NASDAQ). 21 26 (c) Extension of Time. The period of time during which the Seller or the Stockholder is prohibited from engaging in certain business practices pursuant to Sections 12(a) and (b) shall be extended by any length of time during which the Seller or the Stockholder (or either one of them) is in breach of such covenant. (d) Essential Elements. It is understood by and between the parties hereto that the foregoing restrictive covenants set forth in Sections 12(a) and (b) are essential elements of this Agreement, and that, but for the agreement of the Seller and the Stockholder to comply with such covenants, the Purchaser would not have agreed to enter into this Agreement. Such covenants by the Seller and the Stockholder shall be construed as an agreement independent of any other provision in this Agreement. The existence of any claim or cause of action of the Seller or the Stockholder against the Purchaser, whether predicated on this Agreement, or otherwise, shall not constitute a defense to the enforcement by the Purchaser of such covenant. (e) Severability. It is agreed by the parties to this Agreement that if any portion of the restrictive covenants set forth in Sections 12(a) and (b) is held to be unreasonable, arbitrary or against public policy, then each such portion of such covenants shall be considered divisible both as to time and geographical area. The parties agree that, if the specified time period or the specified geographical area applicable to Sections 12(a) and/or (b) is determined to be invalid, unreasonable, arbitrary or against public policy, a lesser period of time or geographical area shall be enforced so long as the same is not unreasonable, arbitrary or against public policy. The parties to this Agreement agree that, if a specified time period or a specified geographical area is determined to be unreasonable, arbitrary or against public policy, a lesser time period or geographical area which is determined to be reasonable, nonarbitrary and not against public policy may be enforced against the Seller and/or the Stockholder. (f) Termination Without Good Cause. In the event of the termination without good cause of the Stockholder by the Purchaser as defined in the Employment Agreement referred to in Section 7(b), the Restrictive Covenants set forth in Sections 12(a) and (b) above shall extend only for a period of one year from the date of such termination. 13. GENERAL. (a) No Brokers. Each of the parties to this Agreement represents and warrants, each to the others, that it has not utilized the services of any finder, broker or agent. Each of the parties agrees to indemnify the other parties against and hold them harmless from any and all liabilities to any person, firm or corporation claiming any broker's or finder's fee or commission of any kind on account of services rendered on behalf of such corporation in connection with the transactions contemplated by this Agreement. (b) Waivers. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein, therein or in any document delivered in connection herewith or therewith. The waiver by any 22 27 party to this Agreement of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. (c) Remedies. (i) General. The parties to this Agreement acknowledge that the performance of their respective obligations hereunder is essential to the consummation of the transactions contemplated by this Agreement. Each of them further acknowledges that the Assets are unique and that no party will have an adequate remedy at law if any other party fails to perform its or his obligations hereunder. The parties further agree that damages at law will be an insufficient remedy to the Purchaser in the event that the restrictive covenants of Sections 12(a) and (b) are violated. In any such event, each party shall have the right, in addition to any other remedies or rights it may have, upon application to a court of competent jurisdiction, to obtain injunctive relief to compel specific performance of this Agreement. The other party agrees to pay to the prevailing party all costs and expenses incurred by the prevailing party relating to the enforcement of this Agreement, including reasonable fees and disbursements of counsel (before, during or after arbitration or trial and in appellate proceedings). The right to seek specific performance by way of injunctive relief provided in this Section 13(c)(i) and the right to indemnification provided in Section 10 shall be the exclusive remedies of the parties pursuant to this Agreement. (ii) Mandatory Arbitration. Should any dispute arise among or between one or more of the parties to this Agreement relating to this Agreement, the interpretation of any provision hereof, or any of the rights or obligations hereunder of any of the parties to this Agreement, then at the election of any party involved in such dispute, such dispute shall be resolved finally by a single arbitrator in an arbitration proceeding conforming to the rules of the American Arbitration Association applicable to commercial arbitrations. The arbitrator shall be appointed as follows: the party not electing to submit the matter to arbitration (the "Non-Electing Party") shall provide to the other (the "Electing Party") a list of three proposed arbitrators, each of whom shall be knowledgeable as to matters that are the subject of the dispute and each of whom shall be completely independent of and with no prior affiliation or direct or indirect relationship with any party or any of their affiliates. The Electing Party shall then select the arbitrator from such list or, if all such proposed arbitrators are reasonably unacceptable to such party, so advise the Non-Electing Party, whereupon such party shall prepare a new list of three proposed arbitrators and the selection process shall begin anew. The arbitration shall take place in a state which shall be agreed to by the parties, other than the state where the Stockholder resides or where the Purchaser is incorporated; provided, however, that if the parties cannot agree upon a state, the arbitration shall take place in Denver, Colorado. The decision of such arbitrator shall be final and binding upon the parties, and such decision shall be enforceable as a judgment in a court of competent jurisdiction. Other than the right to seek specific performance by way of injunctive relief to enforce the provisions of Sections 12(a) and (b) set forth in Section 13(c)(i) above, each party to this Agreement covenants not to institute any suit or other proceeding in any court with respect to any matter arising under or pursuant to or directly or indirectly relating to this Agreement, the subject matter hereof or the other agreements, documents and instruments delivered or required to be delivered hereunder or in connection herewith unless the intended subject matter thereof has first been submitted for arbitration in accordance with the foregoing procedure and such arbitration proceeding has been 23 28 completed. In order to maintain the confidentiality of the dispute intended to be resolved by arbitration as provided in this Agreement as well as the information adduced and contentions asserted in any such arbitration, the parties agree to maintain in strict confidence and agree to neither make nor suffer any public disclosure of the fact of, contentions or evidence, discovered, developed or introduced in and the result of any such arbitration; provided, however, the foregoing to the contrary notwithstanding, that the Purchaser may make public disclosures regarding the existence of the arbitration, the nature of the dispute and the results thereof as may be necessary or appropriate to satisfy the Purchaser's disclosure obligations under applicable securities or other laws. (d) Expenses. Each of the parties to this Agreement shall pay its own expenses in connection with this Agreement and the transactions contemplated hereby, including the fees and expenses of its counsel and its certified public accountants and other experts. (e) Press Releases. The Purchaser and the Seller shall consult with each other and shall mutually agree as to the form and substance of any press release or other public disclosure of matters related to this Agreement prior to the distribution or documentation of any such release; provided however, that nothing herein shall be deemed to prohibit any party from making any disclosure which its counsel deems necessary in order to fulfill such party's disclosure obligations imposed by law. (f) Confidentiality. If the transactions contemplated by this Agreement are not consummated, then each of the parties to this Agreement agrees to keep confidential and to not use for its own benefit any of the information (unless in the public domain) obtained from any other party and to promptly return to such other parties all schedules, documents or other written information (without retaining copies thereof) previously obtained from such other parties. If the transactions contemplated in this Agreement are consummated, each of the parties agrees to keep confidential and not to disclose to any person or entity, whether orally or in writing, any of the terms of the transactions or any of the specific provisions of this Agreement or any of the Exhibits hereto. (g) Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy or similar electronic transmission method; the day after it is sent, if sent by recognized expedited delivery service; and five days after it is sent, if mailed, first class mail, postage prepaid. In each case notice shall be sent to the parties at the addresses set forth on EXHIBIT N. (h) Entire Agreement; Amendment. This Agreement (including the exhibits hereto and all documents and papers delivered pursuant hereto and any written amendments hereof executed by the parties to this Agreement) constitutes the entire agreement, and supersedes all prior agreements and understandings, oral and written, among the parties to this Agreement with respect to the subject matter hereof, other than the agreements and understandings set forth in the Confidentiality Agreement dated August 26, 1997 between the parties hereto, which shall remain in full force and effect in accordance with the terms thereof. This Agreement may not be modified or otherwise amended except by an instrument in writing executed by the parties to this Agreement. 24 29 (i) Assignability. This Agreement shall not be assignable by any of the parties to this Agreement without the prior written consent of all other parties to this Agreement. (j) Venue; Process. The parties to this Agreement agree that jurisdiction and venue of any action brought pursuant to this Agreement, to enforce the terms hereof or otherwise with respect to the relationships between the parties created or extended pursuant hereto, shall properly lie in Denver, Colorado, unless another state is agreed to by the parties. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such Court shall constitute valid and lawful service of process against them, without the necessity for service by any other means otherwise provided by statute or rule of Court. (k) Further Assurances. The parties to this Agreement will execute and deliver, or cause to be executed and delivered, such additional or further transfers, assignments, endorsements or other instruments as any party or its counsel may reasonably request for the purpose of carrying out the transactions contemplated by this Agreement. (l) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (m) Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. (n) Governing Law. The validity, construction and enforcement of, and the remedies under, this Agreement shall be governed in accordance with the laws of the State of Florida (except any choice of law provision of Florida law shall not apply if the law of a state or jurisdiction other than Florida would apply thereby). IN WITNESS WHEREOF, this Agreement has been signed by the individual parties hereto and signed by an officer thereunto duly authorized and attested under the corporate seal by the Secretary of each of the corporate parties hereto, all on the date first above written. ATTEST: CHARTWELL PARTNERS INTERNATIONAL, INC. (CORPORATE SEAL) By: - --------------------------------- ------------------------------ Secretary President "SELLER" 25 30 WITNESSES: - --------------------------------- ------------------------------ DAVID M. DEWILDE - --------------------------------- ------------------------------ As to Stockholder "STOCKHOLDER" ATTEST: LAMALIE ASSOCIATES, INC. (CORPORATE SEAL) By: - --------------------------------- --------------------------- Secretary Jack P. Wissman, Executive Vice President "PURCHASER" 26 31 EXHIBITS
Exhibit Section Description ============================================================================ A 1.5(b), 1.(c) Excluded Assets A(1) 2(c) Form of Note B 2.(f) Assumed Liabilities C 2.(g) Allocation of Purchase Price D 3.(j) Leased Real Property E 3.(m) Employee Benefits Plan of Seller F 3.(n) Owned Personal Property G 3.(o) Leased Personal Property H 3.(e), 3.(f) Seller's Financial Statements 3,(p) I 3.(q) Insurance Policy List J 3.(t) Consents and Approvals to be Obtained by Seller K 7.(b), 8.(d) Form of Employment Agreement L 7.(c) Form of Lock-Up Agreement M 7.(j) Opinion of Seller's Counsel N 13.(g) List of Party Addresses for Notices
27 EX-10.14 4 WARD HOWELL FORM OF EMPLOYMENT AGREEMENT 1 EXHIBIT 10.14 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made and entered into as of this 27th day of February, 1998, by and among LAMALIE ASSOCIATES, INC., a Florida corporation ("LAI"), WARD HOWELL INTERNATIONAL, INC., a Connecticut corporation and the wholly-owned subsidiary of LAI (the "Company"), and NAME, residing at Address, City, State Zip (the "Partner"). W I T N E S S E T H: 1. EMPLOYMENT The Company hereby employs the Partner, and the Partner hereby accepts such employment, upon the terms and subject to the conditions set forth in this Agreement. 2. TERM Subject to the provisions for termination as hereinafter provided, the term of employment under this Agreement shall be effective as of the date first above written and shall continue for a period of three years from the date of this Agreement. 3. COMPENSATION (a) Partner Compensation Plan. (i) All compensation to be paid by the Company to the Partner shall be determined in accordance with the LAI Partner Compensation Plan dated March 1, 1997 (the "Partner Compensation Plan") as adopted by the Compensation Committee (the "Committee") of the Board of Directors of LAI (the "LAI Board"). For a period of three (3) years following the date of this Agreement, the Partner Compensation Plan applicable to the Partner under this Agreement may be amended with respect to the Partner only upon the affirmative vote of holders of two thirds (2/3) or more of the shares of LAI Common Stock then held by former shareholders of Ward Howell International, Inc., a Connecticut corporation ("Ward Howell") who are then employees of the Company, if such shares were acquired by them in connection with the Merger Agreement dated February 20, 1998 by and among LAI, the Company and Ward Howell (the "Merger Agreement"), but excluding for this purpose all such shares held by Michael Corey, Patrick Corey, Paul Hanson and Thomas Moran. (ii) The foregoing to the contrary notwithstanding, for the period January 1, 1998 through February 29, 1999, the Partner will be entitled to receive compensation under the Partner Compensation Plan at the rate of 35% of billings on the first $400,000 of billings and 50% of all billings in excess of $400,000. Solely for purposes of determining the amount of billings for which the Partner shall be credited in making the foregoing determination, the Partner's billings at Ward Howell during January and February 1998 shall be taken into account. 2 (b) Base Salary. Subject to the terms of the Partner Compensation Plan, the Company shall pay to the Partner as basic compensation for all services rendered by the Partner during the term of this Agreement an initial basic annualized salary of $Salary per year, payable monthly or in other more frequent installments, as determined by the Company (the "Base Salary"). The Base Salary shall be treated as an advance against billings generated by the Partner, as more fully set forth in the Partner Compensation Plan. (c) Bonuses. In addition to the Base Salary to be paid pursuant to Section 3(b) of this Agreement, during the term of this Agreement or any renewal or extension, the Company shall pay to the Partner as incentive compensation monthly bonuses based on billings in accordance with the terms of the Partner Compensation Plan. In addition, the Board, in its discretion, may award a bonus or bonuses to the Partner at the Company's fiscal year end, also in accordance with the terms of the Partner Compensation Plan. (d) Stock Option Award. The Partner shall participate in LAI's 1998 Omnibus Stock and Incentive Plan as currently in effect ("the Omnibus Plan"), in accordance with the terms thereof, through the grant on the date hereof of options to purchase _____ shares of LAI's common stock at the closing price on the Nasdaq Stock Market (NMS) on the date of grant (the "Options"). The Options shall vest over a period of five (5) years at the rate of 20% per year, and shall have a term of ten (10) years. Attached hereto as Exhibit A is a Stock Option Certificate in the form to be issued to evidence the Options. The parties acknowledge that the Options will be issued subject to obtaining approval of the Omnibus Plan by LAI's stockholders at their 1998 annual meeting. If such approval is not obtained, LAI will cause the Options to be reissued promptly thereafter on substantially the same terms and conditions as those specified in the first two sentences of this Section 3(d), including the use of the initial date of grant as the starting date for vesting purposes and the same exercise price as under the original Options; provided, however, in the event of such a re-issuance, the parties recognize the options so re-issued will not be able to qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. (e) Reimbursement. The Company shall reimburse the Partner, in accordance with the Company's policies and practices for Partners, for all reasonable expenses incurred by the Partner in the performance of the Partner's duties under this Agreement, provided, however, that the Partner has furnished to the Company an itemized account, reasonably satisfactory to the Company, in substantiation of such expenditures. (f) Other Benefits. The Partner shall be entitled to such fringe benefits including, but not limited to, medical and other insurance benefits as may be provided from time to time by the Company to other Partners of the Company which shall be the same as the benefits provided by LAI to its Partners. (g) Other Incentive and Benefit Plans. The Partner shall be eligible to participate, in accordance with the terms of such plans as they may be adopted, amended and administered from time to time, in incentive, bonus, benefit or similar plans, including without limitation, any stock option, bonus or other equity ownership plan, any short, mid or long term incentive plan and any 3 other bonus, pension or profit sharing plans now existing or hereafter established by the Company or LAI from time to time for its Partners. 4. DUTIES (a) General. The Partner is engaged as a Partner of the Company. The Partner's duties and responsibilities shall be commensurate with the Partner Role Definition as in effect from time to time (the "Partner Role Definition"). The Partner acknowledges having previously received a copy of the Partner Role Definition as currently in effect in the form attached as Exhibit B to this Agreement. Specific duties and responsibilities consistent with the Partner Role Definition may be assigned to the Partner by the Board of Directors of the Company (the "Board") or the LAI Board from time to time. (b) Home Office. The parties acknowledge that the Partner will render services hereunder principally from the Company's office located in ______ (the "Partner's Home Office"). The parties recognize that effectively carrying out the duties and responsibilities of the Partner Role Definition and, accordingly, the effective performance of the Partner's duties under this Agreement, will involve significant amounts of travel away from the locale of the Partner's Home Office. However, the Partner shall not be obligated to relocate to an office from which the Partner is to principally render services located outside of the general locale of the Partner's Home Office. 5. EXTENT OF SERVICES During the term of the Partner's employment under this Agreement, the Partner shall devote full-time energy and attention during regular business hours to the benefit and business of the Company as may be reasonably necessary in performing the Partner's duties pursuant to this Agreement. 6. FACILITIES The Company shall provide the Partner with a fully furnished office in the Partner's Home Office. The facilities of the Company and LAI shall be generally available to the Partner in the performance of the Partner's duties pursuant to this Agreement, it being understood and contemplated by the parties that all equipment, supplies and office personnel reasonably required for the performance of the Partner's duties under this Agreement shall be provided by and at the sole expense of the Company. 4 7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC. (a) Death. If the Partner dies during the term of the Partner's employment, the Company shall pay to the estate of the Partner within 30 days after the date of death such Base Salary and any bonus compensation earned as would otherwise have been payable to the Partner up to the end of the month in which the Partner's death occurs and other compensation which would be earned upon collection of accounts receivable resulting from work performed prior to the date of termination pursuant to the Partner Compensation Plan but not yet paid. After receiving the payments provided in this Section 7(a), the Partner and the Partner's estate shall have no further rights under this Agreement (other than those rights already accrued, which shall specifically include the vesting of options as set forth in Section 8(d) hereof). (b) Disability. (i) During any period of disability, illness or incapacity during the term of this Agreement which renders the Partner at least temporarily unable to substantially perform the services required under this Agreement, the Partner shall receive the Base Salary payable under Section 3(b) of this Agreement plus any bonus compensation earned and other compensation which would be earned upon collection of accounts receivable resulting from work performed prior to the date of termination for Permanent Disability pursuant to the Partner Compensation Plan but not yet paid, less any cash benefits received by him under any disability insurance paid for by the Company. Upon the Partner's "Permanent Disability" (as defined below), which Permanent Disability continues during the payment periods specified herein, the Company shall pay to the Partner the Base Salary payable under Section 3(b) of this Agreement plus any bonus compensation earned and other compensation which would be earned upon collection of accounts receivable resulting from work performed prior to the date of termination for Permanent Disability pursuant to the Partner Compensation Plan to the end of the month in which the Partner is terminated for Permanent Disability as set forth below, less any cash benefits received by him under any disability insurance paid for by the Company. The Partner may be entitled to receive payments under any disability income insurance which may be carried by, provided by or paid for by the Company from time to time. Upon "Permanent Disability" (as that term is defined in Section 7(b)(ii) below) of the Partner, except as provided in this Section 7(b) and in Section 8(d) below, all rights of the Partner under this Agreement shall terminate (other than rights already accrued). (ii) The term "Permanent Disability" as used in this Agreement shall mean, in the event a disability insurance policy is provided or paid for by the Company covering the Partner at such time and is in full force and effect, the definition of permanent disability set forth in such policy. If no such disability policy is so maintained at such time and is then in full force and effect, the term "Permanent Disability" shall mean the inability of the Partner, as reasonably determined by the Board by reason of physical or mental disability to perform the duties required of him under this Agreement for a period of one hundred and twenty (120) days in any one-year period. Successive periods of disability, illness or incapacity will be considered separate periods unless the later period of disability, illness or incapacity is due to the same or related cause and commences less than three months from the ending of the previous period of disability. Upon such determination, the Board may terminate the Partner's employment under this Agreement upon ten (10) days' prior written notice. If any determination of the Board with respect to permanent disability is disputed by the Partner, the parties hereto agree to abide by the decision of a panel of three physicians. The Partner 5 and Company shall each appoint one member, and the third member of the panel shall be appointed by the other two members. The Partner agrees to make himself available for and submit to reasonable examinations by such physicians as may be directed by the Company. Failure to submit to any such examination may be treated by the Company as an admission by the Partner of Permanent Disability. 8. OTHER TERMINATIONS (a) By the Partner. (i) The Partner may terminate the Partner's employment hereunder upon giving at least two weeks' prior written notice. (ii) If the Partner gives notice pursuant to Section 8(a) above, the Company shall have the right (but not the obligation) to relieve the Partner, in whole or in part, of the Partner's duties under this Agreement, or direct the Partner to no longer perform such duties, or direct that the Partner should no longer report to work, or any combination of the foregoing (an "Early Termination"). In any such event, the Partner shall be entitled to receive only the Base Salary and any bonus compensation earned and other compensation which would be earned upon collection of accounts receivable resulting from work performed prior to the date of termination pursuant to the Partner Compensation Plan but not yet paid, as would otherwise have been payable to the Partner up to the date on which the Company provides for Early Termination or, if there is no Early Termination, the expiration of the two week minimum notice period. If the Partner gives notice pursuant to Section 8(a), upon receiving the payments provided for under this Section 8(a), all rights of the Partner to receive compensation or other payments or benefits under this Agreement (other than rights already accrued) shall terminate. (b) Termination for "Good Cause". (i) Except as otherwise provided in this Agreement, the Company may terminate the employment of the Partner hereunder only for "Good Cause," which shall mean (a) the continued refusal or failure of the Partner to make reasonable efforts to carry out his duties as a Partner with the Company as set forth in the Partner Role Definition as in effect on the date of this Agreement and attached as Exhibit B to this Agreement (other than any failure due to physical or mental incapacity), as determined in the reasonable discretion of the LAI Board or the Committee, which has not ceased within a reasonable period (not to exceed 30 days) after a written demand for substantial performance is delivered to the Partner by or on behalf of the Company, which demand shall identify in reasonable detail the manner in which the Company believes that the Partner has not performed such duties and indicates the steps required to be taken to cure such refusal or failure, (b) willful misconduct materially and demonstrably injurious to the Company, financially or otherwise, as determined in the reasonable discretion of the LAI Board or the Committee or (c) the Partner's conviction of or the entering of a plea of nolo contendere to either a felony (excepting any felony traffic offenses, including driving under the influence of alcohol or drugs) or any crime directly related to the Partner's employment by the Company which causes a substantial detriment to the Company. With respect to any proposed termination pursuant to clauses (a) or (b) of the preceding sentence, the Partner may request in writing an opportunity to meet with the LAI Board or the Committee, at or prior to the meeting at which the LAI Board or the Committee will consider whether to terminate this Agreement for Good Cause, to review the matters set forth 6 in the written notice. No termination for Good Cause shall be effected until after any such requested meeting has taken place. (ii) If the employment of the Partner is terminated for Good Cause under Section 8(b)(i) of this Agreement, the Company shall pay to the Partner any Base Salary earned prior to the effective date of termination specified by the LAI Board or the Committee but not yet paid and any bonus compensation earned and other compensation which would be earned upon collection of accounts receivable resulting from work performed prior to the date of termination pursuant to the Partner Compensation Plan but not paid to the Partner prior to the effective date of such termination. Under such circumstances, such payments shall be in full and complete discharge of any and all liabilities or obligations of the Company to the Partner hereunder, and the Partner shall be entitled to no further benefits under this Agreement (other than rights already accrued). (iii) Termination by the Company of the employment of the Partner other than as expressly specified above in Section 8(b)(i) for Good Cause shall be deemed to be a termination of employment by the Company "Without Good Cause." (c) Termination Without Good Cause. (i) Notwithstanding any other provision of this Agreement, the Company shall have the right with or without notice to terminate the Partner's employment Without Good Cause pursuant to the provisions of this Section 8(c). If the Company terminates the Partner's employment with notice, such notice may not provide a termination date more than two weeks after the date on which the notice is delivered to the Partner. If the Company shall terminate the employment of the Partner Without Good Cause effective on a date earlier than the termination date provided for in Section 2 (with the effective date of termination as so identified by the Company being referred to herein as the "Accelerated Termination Date"), the Partner shall continue to receive the Base Salary until the end of the term of this Agreement as provided for in Section 2 or for a period of six months, whichever is longer, plus any bonus compensation earned and other compensation which would be earned upon collection of accounts receivable resulting from work performed prior to the date of such termination pursuant to the terms of the Partner Compensation Plan but not yet paid; provided that, the Company shall have the right to relieve the Partner, in whole or in part, of the Partner's duties under this Agreement, or direct the Partner to no longer perform such duties, or direct that the Partner no longer be required to report to work, or any combination of the foregoing, in each case prior to the Accelerated Termination Date. If the Partner is terminated Without Good Cause pursuant to this provision, the Partner may no longer be required by the Company to perform his duties or report to work after the Accelerated Termination Date. (ii) The parties agree that, because there can be no exact measure of the damage that would occur to the Partner as a result of a termination by the Company of the Partner's employment Without Good Cause, the unearned payments and benefits paid and provided pursuant to this Section 8(c), in addition to being consideration for the release required to be delivered pursuant to Section 8(e) of this Agreement, also shall be deemed to constitute full consideration for any such damages and shall be considered as liquidated damages and not a penalty for the Company's termination of the Partner's employment Without Good Cause. 7 (d) Vesting of Options. Upon any termination of the Partner's employment for any reason (including without limitation death or Permanent Disability) other than a voluntary termination by the Partner pursuant to Section 8(a) hereof or by the Company for Good Cause pursuant to Section 8(b) hereof, any and all vesting requirements or conditions affecting the Options shall be deemed to be fully satisfied or to have fully accrued and any risk of forfeiture with respect thereto shall be deemed to have lapsed. (e) Release. Payment of any compensation to the Partner under this Section 8 following termination of employment other than any Base Salary or bonus compensation earned and other compensation which would be earned upon collection of accounts receivable resulting from work performed prior to the date of termination pursuant to the Partner Compensation Plan but not yet paid shall be conditioned upon the prior receipt by the Company of a release executed by the Partner in substantially the form attached to this Agreement as Exhibit C. (f) Effect on Certain Covenants. Notwithstanding any termination of the Partner's employment, the Partner's covenants set forth in Sections 10, 11 and 12 are intended to and shall remain in full force and effect. 9. DISCLOSURE The Partner agrees that during the term of the Partner's employment by the Company, the Partner will disclose only to the Company all ideas, methods, plans, developments or improvements known by him which relate to the business of the Company acquired by the Partner during the Partner's employment by the Company. Nothing in this Section 9 shall be construed as requiring any such communication where the idea, plan, method or development is lawfully protected from disclosure as a trade secret of a third party or by any other lawful prohibition against such communication. The covenants of this Section 9 shall not be violated by ordinary and customary communications with reporters, bankers and securities analysts and other members of the investment community. 10. CONFIDENTIALITY The Partner agrees to keep in strict secrecy and confidence any and all information the Partner assimilates or to which the Partner has access during the Partner's employment by the Company and which has not been publicly disclosed and is not a matter of common knowledge in the fields of work of the Company, including but not limited to information regarding the Company's focus account strategy both generally and as it may be directed at particular existing and prospective clients, the Company's past, current and future strategic plans and underlying data and confidential and proprietary information regarding search candidates and companies, including but not limited to that available on the Company's CMS system (collectively, the "Confidential Information"). The Partner agrees that both during and after the term of the Partner's employment by the Company, the Partner will not, without the prior written consent of the Company, disclose any Confidential Information to any third person, partnership, joint venture, company, corporation 8 or other organization. The foregoing covenants shall not be breached to the extent that any such Confidential Information was known to the Partner prior to his employment with the Company or becomes a matter of general knowledge other than through a breach by the Partner. Further, the provisions of this Section 10 shall not apply to the Partner to the extent that they would prevent the Partner from utilizing any information known to him personally and contained in the Partner's personal business plan or contained in the Partner's personal Rolodex or similar personal property about pending or prior executive searches for which the Partner was the originating or engagement partner and which will result in an obligation to pay to the Company the liquidated damages amounts set forth in Section 12(b) hereof (the "Personally Developed Information"). The foregoing exceptions with respect to the use of Personally Developed Information and the Partner's personal property shall not relieve the Partner of the Partner's obligation upon termination of employment with the Company to promptly return to the Company any and all Company property, including personal property, software, files and materials used or developed by the Partner during the Partner's employment with the Company or Ward Howell (other than Personally Developed Information), regardless of whether such materials are in analog, digital, paper or electronic documents, files or other media forms. 11. NONSOLICITATION OF EMPLOYEES (a) General. The Partner hereby acknowledges that, during and as a result of the Partner's employment by the Company, the Partner has received and shall continue to receive: (1) special training and education with respect to executive search research and methods and other related matters, and (2) access to confidential information and business and professional contacts, including contacts with clients and prospective clients of the Company. In consideration of the special and unique opportunities afforded to the Partner by the Company as a result of the Partner's employment, as outlined in the previous sentence, the Partner agrees to the restrictive covenants in this Section 11. The parties hereto also acknowledge that the restrictive covenants in this Section 11 are being entered into between the parties in connection with and as a result of the transactions contemplated by the Merger Agreement. (b) Nonsolicitation of Employees. During the term of the Partner's employment, whether pursuant to this Agreement, any automatic or other renewal or extension hereof or otherwise, and, except as may be otherwise herein provided, for a period of two years after the termination of the Partner's employment with the Company for any reason other than termination by the Company Without Good Cause as defined in Section 8(c) of this Agreement, the Partner shall not, directly or indirectly, either as an individual, partner, officer, director, stockholder, executive, advisor, independent contractor, joint venturer, consultant, agent, employee, representative or salesman for any person, firm, partnership, corporation or other entity, or otherwise (1) solicit any of the current or former employees, consultants, directors or officers of the Company, LAI or any of their affiliates to terminate any business relationship with the Company, LAI or any of their affiliates or (2) employ or retain as an independent contractor, consultant or agent any of the current or former employees, consultants, directors or officers of the Company, LAI or any of their affiliates, unless such persons have been separated from any relationship with the Company, LAI or any of their affiliates for at least six (6) months; unless any such employees, consultants, directors or officers of the Company, 9 LAI or any of their affiliates are or have been terminated by the Company, LAI or any of their affiliates. (c) Extension of Time. The period of time during which the Partner is prohibited from engaging in certain business practices pursuant to Section 11 shall be extended by any length of time during which the Partner is in breach of such covenant. (d) Essential Element. It is understood by and between the parties hereto that the foregoing restrictive covenants set forth in this Section 11 are essential elements of this Agreement, and that, but for the agreement of the Partner to comply with such covenants, the Company would not have agreed to enter into this Agreement. Such covenants by the Partner shall be construed as agreements independent of any other provision in this Agreement. 12. REMEDIES (a) Specific Performance. The Partner agrees that damages at law will be an insufficient remedy to the Company if the Partner violates the terms of Sections 9, 10 or 11 of this Agreement and that the Company would suffer irreparable damage as a result of any such violation. Accordingly, it is agreed that the Company shall be entitled, upon application to a court of competent jurisdiction, to obtain injunctive relief to enforce the provisions of such Sections, which injunctive relief shall be in addition to any other rights or remedies available to the Company hereunder. The parties consent to the modification or termination of any injunctive relief obtained pursuant to this Section 12(a) in accordance with and upon the entry of a final decision obtained in arbitration pursuant to Section 12(c) of this Agreement with respect to the subject matter of any such injunction. (b) Liquidated Damages. The Partner agrees that no exact measure of the damage caused to the Company if this Agreement is terminated by the Partner pursuant to Section 8(a) hereof or by the Company for Good Cause as defined in Section 8(b) hereof can be determined, and, therefore, for the purpose of liquidating the amount of damages and not as a penalty, it is agreed that in the case of a termination of this Agreement by the Partner pursuant to Section 8(a) hereof or by the Company for Good Cause as defined in Section 8(b) hereof, and in addition to the injunctive relief provided for by Section 12(a) above, the damages caused shall be and are fixed, liquidated and determined at an amount, payable in cash, which shall be equal to the sum of (i), (ii) and (iii) below; provided, however, that this Section 12(b) shall not apply in the case of termination of this Agreement by the Company for Good Cause as defined in Section 8(b) hereof if such termination for Good Cause is based on the Partner's failure to comply with the second or fourth bullet points under "Professionalism", the sixth bullet point under "Quality," or any of the bullet points under "Partnership" set forth in the Partner Role Definition attached to this Agreement as Exhibit B. (i) If the date of termination occurs on or before one year after the date of execution of this Agreement, a lump sum cash payment in the amount of $Liquidated Damages (the "Lump Sum Liquidated Damage Payment"); if the termination date occurs more than one year after the date of execution of this Agreement, but no later than the end of the second year after such execution, a 10 lump sum cash payment equal to two-thirds (2/3) of the Lump Sum Liquidated Damage Payment; if the termination date occurs more than two years after the date of execution of this Agreement but before the expiration of the three-year term of this Agreement, a lump sum cash payment equal to one-third (1/3) of the Lump Sum Liquidated Damage Payment; and if the termination date occurs more than three years after the date of execution of this Agreement, no Lump Sum Liquidated Damage Payment shall be made. (ii) Fifty percent (50%) of the gross fee revenues derived by the Partner personally or by any entity with which Partner becomes employed or otherwise associated (whichever is greater) from any executive search work performed or assignment obtained as a result of or in connection with Competition by the Partner with the Company as defined below during the remainder of the unexpired term of this Agreement (the "Competition Period"), including revenues paid later than the Competition Period as a result of work performed during the Competition Period, to the extent that such revenues are generated from existing clients of LAI or any of its affiliates as of the date of this Agreement or from new clients of the Company, LAI or any of their affiliates acquired after the date of this Agreement which are not set forth on Exhibit D hereto. If the date of termination occurs within 90 days after the occurrence of any "Pivotal Change in Control of LAI," as that term is defined in Section 12(b)(v), the Partner's obligation to make payment to the Company of the amounts set forth in this Section 12(b)(ii) shall terminate. (iii) Thirty-five percent (35%) of the gross fee revenues derived by the Partner personally or by any entity with which Partner becomes employed or otherwise associated (whichever is greater) from any executive search work performed or assignment obtained as a result of or in connection with Competition by the Partner with the Company as defined below during the remainder of the unexpired term of this Agreement, including revenues paid later than the Competition Period as a result of work performed during the Competition Period, to the extent that such revenues are generated from the clients of Ward Howell as listed on Exhibit D. If the date of termination occurs within 90 days after the occurrence of any "Pivotal Change in Control of LAI," as that term is defined in Section 12(b)(v), the Partner's obligation to make payment to the Company of the amounts set forth in this Section 12(b)(iii) shall terminate. (iv) "Competition" by the Partner with the Company for purposes of this Section 12 shall be defined as any of the following actions taken by the Partner, directly or indirectly, either as an individual, partner, officer, director, stockholder, executive, advisor, independent contractor, joint venturer, consultant, agent, employee, representative or salesman for any person, firm, partnership, corporation or other entity, or otherwise, during the Competition Period: (1) soliciting or counseling any third person, partnership, joint venture, company, corporation, association or other organization that is or was a client (including for purposes of this clause (1) and not for purposes of clause (2) below, any individual who is or was an employee, principal, partner, officer or director of a client) of the Company, LAI, Ward Howell, or any of their affiliates, regardless of such person's or entity's location, to terminate any business relationship with the Company, LAI, Ward Howell or any of their affiliates and/or to commence a similar business relationship with any other individual or entity; (2) accepting, with or without solicitation, any business from any third person, partnership, joint venture, company, corporation, association or other organization that is or was a client of the Company, LAI, Ward Howell or any of their affiliates, regardless of such person's or entity's location. 11 (v) "Pivotal Change in Control of LAI" shall mean any of the following: (1) the acquisition of "beneficial ownership" as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "1934 Act") of LAI's securities comprising 51% or more of the combined voting power of LAI's outstanding securities by any "person" (as that term is used in Sections 13(d) and 14(d)(2) of the 1934 Act), but shall not include any acquisition or ownership by (X) LAI, (Y) any trustee or fiduciary acting in that capacity for an employee benefit plan sponsored by LAI or (Z) persons who prior to any such acquisition were employees of the Company, LAI and any subsidiary of the Company or LAI and, in each of the foregoing, each such person's "affiliates" and "associates" (as those terms are defined under the 1934 Act), (2) the failure of the "Incumbent Directors" (as defined below) to constitute at least a majority of all directors of LAI (for these purposes, "Incumbent Directors" means individuals who were the directors of LAI on January 1, 1998, and, after his or her election, any individual becoming a director subsequent to January 1, 1998, whose election, or nomination for election by LAI's stockholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent Directors, except that no individual shall be considered an Incumbent Director who is not recommended by management and whose initial assumption of office as a director is in connection with an actual or threatened "election contest" relating to the "election of directors" of LAI, as such terms are used in Rule 14a-11 of Regulation 14A under the 1934 Act; (3) the closing of a sale of all or substantially all of the assets of LAI; or (4) the closing of a merger or consolidation involving LAI in which LAI is not the surviving corporation and then only if immediately following such merger or consolidation, less than a majority of the surviving corporation's outstanding voting stock is held by persons who were stockholders of LAI immediately prior to such merger or consolidation. (c) Mandatory Arbitration. (i) General. Should any dispute arise among or between one or more of the parties to this Agreement relating to this Agreement, the interpretation of any provision hereof, or any of the rights or obligations hereunder of any of the parties to this Agreement, then at the election of any party involved in such dispute, such dispute shall be resolved finally by a single arbitrator (who, to the extent reasonably practical in accordance with the rules and procedures of the American Arbitration Association, will be a retired judge) in an arbitration proceeding conforming to the rules of the American Arbitration Association applicable to commercial arbitrations. If the arbitration proceeding would qualify as an expedited arbitration proceeding pursuant to the rules of the American Arbitration Association based on the amount in controversy, the rules applicable to expedited arbitrations shall apply. (ii) Appointment of Arbitrator. The arbitrator shall be appointed as follows: the party not electing to submit the matter to arbitration (the "Non-Electing Party") shall provide to the other (the "Electing Party") a list of three proposed arbitrators, each of whom shall be knowledgeable as to matters that are the subject of the dispute and each of whom shall be completely independent of and with no prior affiliation or direct or indirect relationship with any party or any of their affiliates. The Electing Party shall then select the arbitrator from such list or, if all such proposed arbitrators are reasonably unacceptable to such party, so advise the Non-Electing Party, whereupon such party shall prepare a new list of three proposed arbitrators and the selection process shall begin anew. 12 (iii) Location of Arbitration. The arbitration shall take place in the closest of Atlanta, Georgia, Chicago, Illinois, Houston, Texas, Los Angeles, California, New York, New York, Phoenix, Arizona or Tampa, Florida, to the city in which the Partner's Home Office is located. (iv) Effect of Arbitration. The decision of such arbitrator shall be final and binding upon the parties, and such decision shall be enforceable as a judgment in a court of competent jurisdiction. Other than the Company's right to seek specific performance by way of injunctive relief to enforce the provisions of Sections 9, 10 and 11 set forth in Section 12(a) above, each party to this Agreement covenants not to institute any suit or other proceeding in any court with respect to any matter arising under or pursuant to or directly or indirectly relating to this Agreement, the subject matter hereof or the other agreements, documents and instruments delivered or required to be delivered hereunder or in connection herewith unless the intended subject matter thereof has first been submitted for arbitration in accordance with the foregoing procedure and such arbitration proceeding has been completed. (v) Confidentiality of Arbitration. In order to maintain the confidentiality of the dispute intended to be resolved by arbitration as provided in this Agreement as well as the information adduced and contentions asserted in any such arbitration, the parties agree to maintain in strict confidence and agree to neither make nor suffer any public disclosure of the fact of, contentions or evidence, discovered, developed or introduced in and the result of any such arbitration; provided, however, the foregoing to the contrary notwithstanding, that the Company may make public disclosures regarding the existence of the arbitration, the nature of the dispute and the results thereof as may be necessary or appropriate to satisfy the Company's disclosure obligations under applicable securities or other laws. 13. MISCELLANEOUS (a) Waiver of Breach. The waiver by either party to this Agreement of a breach of any of the provisions of this Agreement by the other party shall not be construed as a waiver of any subsequent breach by such other party. (b) Compliance With Other Agreements. The Partner represents and warrants that the execution of this Agreement by him and the Partner's performance of the Partner's obligations hereunder will not conflict with, result in the breach of any provision of or the termination of or constitute a default under any agreement to which the Partner is a party or by which the Partner is or may be bound. (c) Binding Effect; Assignment. The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company. This Agreement is a personal employment contract and the rights, obligations and interests of the Partner hereunder may not be sold, assigned, transferred, pledged or hypothecated. (d) Entire Agreement. This Agreement contains the entire agreement and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof. This 13 Agreement may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge is sought. (e) Headings, Etc. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Use of the term "Partner" is for the convenience of the parties and is not intended to alter the employee-employer relationship between the Company as a corporation and the Partner as an employee of a corporation described in this Agreement. (f) Florida Law. This Agreement shall be construed pursuant to and governed by the substantive laws of the State of Florida (except that any provision of Florida law shall not apply if the application of such provision would result in the application of the law of a state or jurisdiction other than Florida). (g) Venue; Process. To the extent it is necessary to resolve any disputes arising under this Agreement, and the agreements and instruments and documents contemplated hereby in a court and resolution by a court is consistent with the provisions of Section 12, the parties to this Agreement agree that jurisdiction and venue in any action brought pursuant to this Agreement to enforce its terms or otherwise with respect to the relationships between the parties shall properly lie in the Circuit Court of the Thirteenth Judicial Circuit of the State of Florida in and for Hillsborough County (the "Circuit Court") or in the United States District Court for the Middle District of Florida, Tampa Division or in any state or federal court located in Chicago, Illinois, Los Angeles, California and New York, New York. Such jurisdiction and venue are merely permissive; jurisdiction and venue shall also continue to lie in any court where jurisdiction and venue would otherwise be proper. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by statute or rule of court. The parties agree that they will not object that any action commenced in the foregoing jurisdictions is commenced in a forum non conveniens. (h) Severability. Any provision of this Agreement which is determined pursuant to arbitration under Section 12 of this Agreement (or to the extent it is necessary to resolve any disputes arising under this Agreement, and the agreements and instruments and documents contemplated hereby in a court and resolution by a court is consistent with the provisions of Section 12, by a court of competent jurisdiction) to be prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. In any such case, such determination shall not affect any other provision of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect. If any provision or term of this Agreement is susceptible to two or more constructions or interpretations, one or more of which would render the provision or term void or unenforceable, the parties agree that a construction or interpretation which renders the term or provision valid shall be favored. 14 (i) Enforcement. If after written demand to comply with the obligations of one of the parties to this Agreement served in writing on the other, compliance or reasonable assurance of compliance is not forthcoming, and the party demanding compliance engages the services of an attorney to enforce rights under this Agreement, the prevailing party in any action shall be entitled to recover all reasonable costs and expenses of enforcement (including reasonable attorneys' fees and reasonable expenses during investigation, before litigation or arbitration, and at trial and in appellate proceedings). In addition, each of the parties agrees to indemnify the other in respect of any and all claims, losses, costs, liabilities and expenses, including reasonable fees and reasonable disbursements of counsel (during investigation prior to initiation of litigation or arbitration and at trial and in appellate proceedings if litigation ensues), directly or indirectly resulting from or arising out of a breach by the other party of their respective obligations hereunder. The parties' costs of enforcing this Agreement shall include prejudgment interest. Additionally, if any party incurs any out-of-pocket expenses in connection with the enforcement of this Agreement, all such amounts shall accrue interest at 10% per annum (or such lower rate as may be required to avoid any limit imposed by applicable law) commencing 30 days after any such expenses are incurred. (j) Notices. All notices which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy or similar electronic transmission method; one working day after it is sent, if sent by recognized expedited delivery service; and three days after it is sent, if mailed, first class mail, certified mail, return receipt requested, with postage prepaid. In each case notice shall be sent to: To the Company: LAMALIE ASSOCIATES, INC. Suite 220E 3903 Northdale Boulevard Tampa, FL 33624 Attn: Chief Financial Officer Fax: (813) 962-2138 To the Partner at the Partner's address as set forth on the first page of this Agreement, or to such other address as either party may specify by written notice to the other. (k) LAI Guaranty. LAI unconditionally guarantees the full and prompt performance by the Company of all of the Company's duties and obligations under this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. ATTEST: LAMALIE ASSOCIATES, INC. (Corporate Seal) ________________________________ By:____________________________________ Secretary Robert L. Pearson, President 15 "LAI" ATTEST: WARD HOWELL INTERNATIONAL, INC. (Corporate Seal) By: - -------------------------------- ------------------------------- Secretary "Company" Witnesses: - -------------------------------- -------------------------------------- Shareholder - -------------------------------- As to Partner "Partner" EX-23.9 5 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23.9 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the incorporation of our report included in this Form 8-K, into the Company's previously filed Registration Statement File No. 333-30903. /s/ ARTHUR ANDERSEN LLP Tampa, Florida March 13, 1998 EX-23.10 6 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.10 CONSENT OF INDEPENDENT AUDITORS We consent to the use of our report dated August 1, 1997, with respect to the balance sheets of Ward Howell International, Inc. as of December 31, 1996 and 1995 and the related statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996 which report appears in the Form 8-K of Lamalie Associates, Inc. to be filed on March 13, 1998. /s/ KPMG PEAT MARWICK LLP New York, New York March 10, 1998 -----END PRIVACY-ENHANCED MESSAGE-----